| a) |
Under IFRS 5 – ‘Non-current Assets Held for Sale and Discontinued Operations’ the post tax profit of discontinued operations and the post tax loss on disposal of those operations are disclosed as a single amount towards the bottom of the income statement. Also, under IFRS 1 – ‘First-time Adoption of International Financial Reporting Standards’ goodwill recognised under previous GAAP as a deduction from equity is not transferred to the income statement on disposal of the subsidiary. |
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| b) |
Under IFRS 3 – ‘Business Combinations’ amortisation of goodwill is no longer required but instead annual impairment reviews have to be performed. Johnson Matthey has elected to take advantage of the exemption allowed under IFRS 1 not to recalculate goodwill for all business combinations. Therefore the group has not adjusted its carrying amount of goodwill at 1st April 2004 (the group’s date of transition) from that previously disclosed under UK GAAP. The only adjustment to goodwill on the balance sheet is to reverse all amortisation charged since 1st April 2004. |
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| c) |
Under IAS 38 – ‘Intangible Assets’ the group has to capitalise all development expenditure which meet the recognition criteria laid down in the standard and then amortise the asset over its useful life once it is available for use. Under UK GAAP Johnson Matthey did not capitalise any development expenditure. Under IFRS, assets have been recognised in Catalysts Division for some development expenditure on heavy duty diesel catalysts and fuel cell components. The group believes that all other development expenditure is for incremental improvements to existing processes or for projects in an early stage of development and so no assets have been recognised.
In addition, under IAS 38 any capitalised software that is not an integral part of the related hardware is reclassified from property, plant and equipment to intangible assets. |
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| d) |
Under IFRS 2 – ‘Share-based Payment’ the group has to recognise a charge to income in respect of the fair value of outstanding share options granted to employees and shares allocated to employees under the long term incentive plan after 7th November 2002. The fair value has been calculated using an adjusted Black-Scholes options valuation model and is charged to income over the relevant vesting periods, adjusted to reflect actual and expected levels of vesting. |
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| e) |
As Johnson Matthey has already adopted FRS 17, the recent UK GAAP standard for post retirement benefits, the only adjustments needed for post-employment benefits under IAS 19 – ‘Employee Benefits’ are to put the net return on retirement benefits assets and liabilities into operating profit, to change the market value of the pension schemes’ assets from mid-market value to bid value on the balance sheet and to move the deferred tax balances on the net post-employment assets / obligations to deferred tax.
The other adjustments under IAS 19 are to accrue for paid annual leave and other short and long term employee benefits. |
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| f) |
Under IAS 28 – ‘Investments in Associates’ the group’s share of the profit of its associates is shown on a post tax basis, unlike UK GAAP where the group’s share of the operating profit of its associates is shown and the group’s share of its associates’ interest and tax are shown in finance costs and income tax expense respectively. |
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| g) |
Under IAS 12 – ‘Income Taxes’ the group will be providing for deferred tax on capital gains rolled over, capital gains on intra group loans and capital losses which it did not provide for under UK GAAP. Other adjustments are to provide for deferred tax on the other IFRS accounting changes. Also, IAS 12 does not allow the offset of tax assets and liabilities and so the group has grossed up its current tax assets and liabilities and its deferred tax assets and liabilities. |
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| h) |
Under IAS 10 – ‘Events After the Balance Sheet Date’ dividends declared after the balance sheet date are not recognised as a liability on the balance sheet and so the group’s final dividend has not been provided for on the balance sheet. |
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| i) |
Under IAS 17 – ‘Leases’ the group’s precious metal leases are categorised as operating leases and so they, and the related inventory, are removed from the balance sheet and will be reported as a note on the accounts. |
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| j) |
There are a number of other reclassifications on the balance sheet mainly to separate out current and non-current assets and liabilities in accordance with IAS 1 – ‘Presentation of Financial Statements’. |
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| k) |
Johnson Matthey has taken advantage of the exemption allowed under IFRS 1 not to restate comparative information in its accounts for the year ending 31st March 2006 to comply with IAS 32 – ‘Financial Instruments: Disclosure and Presentation’, IAS 39 – ‘Financial Instruments: Recognition and Measurement’ and IFRS 4 – ‘Insurance Contracts’. From 1st April 2005 the group will use hedge accounting for interest rate and foreign currency instruments that meet the relevant hedging relationship criteria. |
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| l) |
When Johnson Matthey presents its segmental results for the year ending 31st March 2006 Colour Technologies, which currently forms part of Colours & Coatings Division, will be transferred to Precious Metal Products Division. Ceramics, which comprises the remaining part of Colours & Coatings Division, will be shown as a separate segment. Platinum group metal refining, currently part of Catalysts Division, will also be transferred to Precious Metal Products Division. The segmental information under IFRS for the year ended 31st March 2005 shown on page 83 reflects the divisional structure that will appear in next year’s accounts. |
