Bigblu Broadb. Regulatory News (BBB)

21 Dec 2005 13:29

Berkeley Berry Birch PLC21 December 2005 Berkeley Berry Birch plcAdoption of International Financial Reporting StandardsRestatement of Financial Information for the year ended 31 March 2005 Introduction Until 31 March 2005, the Group prepared its audited annual financial statementsand unaudited interim results under UK Generally Accepted Accounting Principles('UK GAAP'). As an EU-listed company, Berkeley Berry Birch plc is required toadopt International Financial Reporting Standards ('IFRS') for the reporting ofthe Group's results with effect from 1 April 2005. The results for the sixmonths to 30 September 2005 will therefore represent the Group's first interimstatements prepared in accordance with its accounting policies under IFRS. This report: • summarises the main changes to the Group's accounting policies (Appendix I); • restates the Group's results for the year ended 31 March 2005 and the interim results for the six months ended 30 September 2004 from a UK GAAP basis to an unaudited IFRS basis (Appendix II); and • states the Group's principal accounting policies under IFRS (Appendix III). No adjustments have been made for any changes in estimates made at the time ofapproval of the UK GAAP financial statements for the year ended 31 March 2005 orthe interim statements for the period ended 30 September 2004 on which the IFRSfinancial information is based, as required by IFRS 1. These results are based on the IFRS expected to be applicable as at 31 March2006 and the interpretation of those standards. IFRS are subject to possibleamendment by, and interpretive guidance from, the International AccountingStandards Board, as well as the ongoing review and endorsement by the EU, andare therefore still subject to change. These figures may therefore requireamendment, to change the basis of accounting and/or presentation of certainfinancial information, before their inclusion in the IFRS financial statementsfor the year ending 31 March 2006, when the Group prepares its first completeset of IFRS financial statements. Appendix IMain changes to the Group's accounting policies The main IFRS adjustment affecting the Group's financial statements is inrespect of the accounting for post retirement benefits. Under UK GAAP, the Groupaccounted for post retirement benefits under SSAP24, whereby the costs ofproviding pensions under the Group's defined benefit scheme were charged againstoperating profit on a systematic basis with the net actuarial loss in the schemeallocated over the expected average remaining service lives of currentemployees. As permitted under IFRS1, the net actuarial loss of £2,967,000 as at1 April 2004, the date of transition to IFRS, has been recognised as a liabilityon the balance sheet. This change is similar to that which would have beenrequired under FRS17, which the Group would have been required to comply withfrom 1 April 2005 had it not been required to adopt IFRS. In respect ofactuarial gains and losses arising after 1 April 2004, the Group has elected torecognise these in full in the period in which they occur outside the incomestatement and presented in the statement of changes in total equity. Under UK GAAP, goodwill arising on the acquisition of businesses on the balancesheet is amortised over its useful economic life. Under IFRS, such goodwill isnot amortised but is subject to annual impairment reviews. Under the IFRStransitional arrangements, the net book value of the goodwill at 1 April 2004 of£26,197,000 is deemed to be the cost going forward. As a result of theimpairment provision made at March 2005, the impact of no longer amortisinggoodwill is not material in the year ended 31 March 2005. Under UK GAAP, certain items, notably profits and losses on the disposal ofproperty, businesses and subsidiaries are required to be disclosed separatelybelow operating profit/(loss) in arriving at the profit/(loss) before taxationin the income statement. Under the IFRS presentation, such amounts form part ofthe operating profit/(loss). Other than changes in presentation, the main change to the cash flow statementis in respect of the bank deposit given as security by the parent company for aletter of credit in favour of the Group's captive insurance company. UnderUKGAAP this deposit does not meet the definition of either cash or liquidresources whereas under IFRS it forms part of cash and cash equivalents andtherefore such balances are £600,000 higher at 31 March 2005 (£606,000 at 30September 2004). Appendix IIRestatement of the Group's results for the year ended 31 March 2005 The table below shows the restatement of the consolidated income statement forthe year ended 31 March 2005 from UK GAAP to IFRS. As described above, the profiton disposal of property (£68,000), the loss on disposal of business (£1,139,000)and the loss on disposal of subsidiary undertakings (£554,000) have beenreallocated to form part of the operating loss in the IFRS format. UK GAAP Restated in IFRS_________________Effect of adoption of IFRS_________________ Under format (a) (b) (c) (d) (e) IFRS £'000 £'000 £'000 £'000 £'000 £'000 £'000------------------------------------------------------------------------------------------------------------------------ Revenue 67,283 - - - - - 67,283Costs of sales (48,914) - - - - - (48,914)------------------------------------------------------------------------------------------------------------------------Gross profit 18,369 - - - - - 18,369Operating expenses (42,764) 1,405 (1,257) - 74 (3) (42,545)Disposal of business (1,139) - - (53) - - (1,192)Disposal of subsidiaries (554) - - - - - (554)------------------------------------------------------------------------------------------------------------------------Operating loss (26,088) 1,405 (1,257) (53) 74 (3) (25,922)Interest income 410 - - - - - 410Interest expense (35) - - - - - (35)------------------------------------------------------------------------------------------------------------------------Loss before tax (25,713) 1,405 (1,257) (53) 74 (3) (25,547)Taxation 27 - - - - - 27------------------------------------------------------------------------------------------------------------------------Profit for the period (25,686) 1,405 (1,257) (53) 74 (3) (25,520)========================================================================================================================Attributable to:Shareholders' equity (25,662) 1,405 (1,257) (53) 74 (3) (25,496)Minority interests (24) - - - - - (24)------------------------------------------------------------------------------------------------------------------------Loss for the financial Period (25,686) 1,405 (1,257) (53) 74 (3) (25,520)======================================================================================================================== Loss per share (pence)Basic and diluted (28.2) (28.1) Notes on effect of adoption of IFRS: (a Under IFRS, goodwill is not amortised and therefore the charge in the year has been reversed.(b) The reversal of the amortisation in respect of the goodwill arising on the acquisition of the Berkeley Financial Services Group increases the net book value at 31 March 2005 by £1,257,000 and hence the impairment charge to reduce the goodwill to its estimated recoverable amount is increased accordingly.(c) The reversal of the amortisation in respect of the goodwill arising on the acquisition of Professional Financial Solutions Limited increases the net book value at 31 March 2005 by £53,000 and hence the loss on the disposal of this goodwill is increased accordingly.(d) This adjustment reflects the difference in the charge for pensions as a result of adopting IAS19.(e) This adjustment is for the movement in the accrual for untaken holiday entitlement required under IAS19. The table below shows the restatement of the consolidated balance sheet as at 31March 2005: UK GAAP Restated in IFRS___________________Effect of adoption of IFRS____________________ Under format (a) (b) (c) (d) (e) (f) IFRS £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000------------------------------------------------------------------------------------------------------------------------AssetsNon-current assetsIntangible assets 3,806 221 1,405 (1,257) (53) - - 4,122Property, plant and equipment 998 (221) - - - - - 777------------------------------------------------------------------------------------------------------------------------ 4,804 - 1,405 (1,257) (53) - - 4,899------------------------------------------------------------------------------------------------------------------------Current assetsTrade and other receivables 10,075 - - - - - - 10,075Cash and cash equivalents 12,749 - - - - - - 12,749------------------------------------------------------------------------------------------------------------------------ 22,824 - - - - - - 22,824------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Total assets 27,628 - 1,405 (1,257) (53) - - 27,723------------------------------------------------------------------------------------------------------------------------LiabilitiesNon-current liabilitiesLong-term borrowings (32) - - - - - - (32)Retirement benefit liabilities - - - - - (3,251) - (3,251)Other provisions for liabilities and charges (5,729) - - - - - - (5,729)Other non-current liabilities (310) - - - - - - (310)------------------------------------------------------------------------------------------------------------------------ (6,071) - - - - (3,251) - (9,322)------------------------------------------------------------------------------------------------------------------------Current liabilitiesShort-term borrowings (255) - - - - - - (255)Trade and other payables (11,978) - - - - - (56) (12,034)Current tax payable (150) - - - - - - (150)Other provisions for liabilities and charges (5,172) - - - - - - (5,172)------------------------------------------------------------------------------------------------------------------------ (17,555) - - - - - (56) (17,611)------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Total liabilities (23,626) - - - - (3,251) (56) (26,933)------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Net assets 4,002 - 1,405 (1,257) (53) (3,251) (56) 790======================================================================================================================== Capital and reservesCalled up share capital 9,179 - - - - - - 9,179Share premium account 17,019 - - - - - - 17,019Merger reserve 5,589 - 1,257 (1,257) - - - 5,589Profit and loss account (27,970) - 148 - (53) (3,251) (56) (31,182)------------------------------------------------------------------------------------------------------------------------Shareholders' equity 3,817 - 1,405 (1,257) (53) (3,251) (56) 605Minority interests 185 - - - - - - 185------------------------------------------------------------------------------------------------------------------------Total equity 4,002 - 1,405 (1,257) (53) (3,251) (56) 790======================================================================================================================== Notes on effect of adoption of IFRS: (a) Under UK GAAP, software assets were included as part of property, plant and equipment whereas under IFRS, unless they are integral to another fixed asset, they are included as part of intangible assets. This adjustment transfers the net book value of software asset of £221,000 at 31 March 2005 from property, plant and equipment to intangible assets.(b) Under UK GAAP, goodwill on the balance sheet is amortised over its useful economic life. Goodwill is not amortised under IFRS from 1 April 2004 and therefore the amortisation charge since then of £1,405,00 is added back to intangible assets. The amortisation of the goodwill arising on the acquisition of the Berkeley Financial Services Group of £1,257,000 was charged against the merger reserve which arose on this acquisition and is therefore adjusted against that reserve rather than the profit and loss account.(c) The reversal of the amortisation in respect of the goodwill arising on the acquisition of the Berkeley Financial Services Group increases the net book value at 31 March 2005 by £1,257,000 and hence the impairment charge to reduce the goodwill to its estimated recoverable amount is increased accordingly.(d) The reversal of the amortisation in respect of the goodwill arising on the acquisition of Professional Financial Solutions Limited increases the net book value at 31 March 2005 by £53,000 and hence the loss on the disposal of this goodwill is increased accordingly.(e) Under IFRS, the deficit in the Group's defined benefit pension scheme is recognised as a liability on the balance sheet.(f) This adjustment is for the accrual for untaken holiday entitlement required under IAS19. The table below shows the restatement of the consolidated income statement forthe six months ended 30 September 2004 from UKGAAP to IFRS. UK GAAP Effect of Restated in IFRS____adoption of IFRS____ under format (a) (b) IFRS £'000 £'000 £'000 £'000 --------------------------------------------------------------------------------Revenue 35,026 - - 35,026Cost of sales (25,570) - - (25,570)--------------------------------------------------------------------------------Gross profit 9,456 - - 9,456Operating expenses (10,123) 697 37 (9,389)--------------------------------------------------------------------------------Operating loss (667) 697 37 67Interest income 188 - - 188Interst expense (20) - - (20)--------------------------------------------------------------------------------Loss before tax (499) 697 37 235Taxation - - - ---------------------------------------------------------------------------------Profit for the period (499) 697 37 235================================================================================ Attributable to:Shareholders' equity (493) 697 37 241Minority interests (6) - - (6)--------------------------------------------------------------------------------Loss for the financial period (499) 697 37 235================================================================================ Loss per shareBasic and diluted (0.5) 0.3 Notes on effect of adoption of IFRS: (a) Under IFRS, goodwill is not amortised and therefore the charge in the period has been reversed.(b) This adjustment reflects the difference in the charge for pensions as a result of adopting IAS19. The table below shows the restatement of the consolidated balance sheet as at 30September 2004. The UK GAAP balance sheet has been restated for the change inaccounting policy in respect of the presentation of provisions to record suchbalances gross of amounts recoverable from third parties as described in note 2on page 31 of the Annual Report and Accounts 2005. Previously, these provisionswere shown net of recoverable amounts. The restatement has increased debtors andprovisions at 30 September 2004 by £6,008,000. There was no impact on the incomestatement for the period ended 30 September 2004. UK GAAP restated Restated in IFRS___________________Effect of adoption of IFRS____________________ Under format (a) (b) (c) (d) (e) (f) IFRS £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000------------------------------------------------------------------------------------------------------------------------AssetsNon-current assetsIntangible assets 25,408 243 697 - - - - 26,348Property, plant and equipment 2,171 (243) - - - - - 1,928------------------------------------------------------------------------------------------------------------------------ 27,579 - 697 - - - - 28,276------------------------------------------------------------------------------------------------------------------------Current assetsTrade and other receivables 13,496 - - - - - - 13,496Cash and cash equivalents 10,922 - - - - - - 10,922------------------------------------------------------------------------------------------------------------------------ 24,418 - - - - - - 24,418------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Total assets 51,997 - 697 - - - - 52,694------------------------------------------------------------------------------------------------------------------------LiabilitiesNon-current liabilitiesLong-term borrowings (376) - - - - - - (376)Retirement benefit liabilities - - - - (2,930) - - (2,930)Other provisions for liabilities and charges (6,414) - - - - - - (6,414)Other non-current liabilities (317) - - - - - - (317)------------------------------------------------------------------------------------------------------------------------ (7,107) - - - (2,930) - - (10,037)------------------------------------------------------------------------------------------------------------------------Current liabilitiesShort-term borrowings (208) - - - - - - (208)Trade and other payables (10,571) - - - - (53) - (10,624)Current tax payable (27) - - - - - - (27)Other provisions for liabilities and charges (4,420) - - - - - (475) (4,895)------------------------------------------------------------------------------------------------------------------------ (15,226) - - - - (53) (475) (15,754)------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Total liabilities (22,333) - - - (2,930) (53) (475) (25,791)------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Net assets 29,664 - 697 - (2,930) (53) (475) (26,903)======================================================================================================================== Capital and reservesCalled up share capital 9,179 - - - - - - 9,179Share premium account 17,019 - - - - - - 17,019Shares to be issued 475 - - - - - (475) -Revaluation reserve 358 - - (358) - - - -Merger reserve 25,777 - 629 - - - - 26,406Profit and loss account (23,347) - 68 358 (2,930) (53) - (25,904)------------------------------------------------------------------------------------------------------------------------Equity shareholders' funds 29,461 - 697 - (2,930) (53) (475) 26,700Minority interests 203 - - - - - - 203------------------------------------------------------------------------------------------------------------------------Total equity 29,664 - 697 - (2,930) (53) (475) 26,903======================================================================================================================== Notes on effect of adoption of IFRS: (a) Under UK GAAP, software assets were included as part of property, plant and equipment whereas under IFRS, unless they are integral to another fixed asset, they are included as part of intangible assets. This adjustment transfers the net book value of software asset of £243,000 at 30 September 2004 from property, plant and equipment to intangible assets.(b) Under UK GAAP, goodwill on the balance sheet is amortised over its useful economic life. Goodwill is not amortised under IFRS from 1 April 2004 and therefore the amortisation charge since then of £697,000 is added back to intangible assets. The amortisation of the goodwill arising on the acquisition of the Berkeley Financial Services Group of £629,000 was charged against the merger reserve which arose on this acquisition and is therefore adjusted against that reserve rather than the profit and loss account.(c) Until 31 March 2004, freehold buildings were stated at valuation less accumulation depreciation. As permitted under IFRS1, on the transition to IFRS the revalued amount has been treated as deemed cost at the date of the revaluation and therefore the revaluation reserve of £358,000 has been transferred to the profit and loss account.(d) Under IFRS, the deficit in the Group's defined benefit pension scheme is recognised as a liability on the balance sheet.(e) This adjustment is for the accrual for untaken holiday entitlement required under IAS19.(f) Under UK GAAP, where a deferred consideration can be settled in shares or cash at the option of the company, the liability is treated as equity. Under IFRS, unless the number of shares to be issued is fixed, a deferred consideration for an acquisition is treated as a liability. Appendix IIIPrincipal accounting policies Basis of preparation The consolidated income statement and the consolidated balance sheet have beenprepared under the historical cost convention and in accordance withInternational Financial Reporting Standards ('IFRS') as adopted by the EuropeanUnion. IFRS1, 'First time adoption of International Financial ReportingStandards' allows certain exemptions from retrospective application of IFRS inthe opening balance sheet at 1 April 2004 and where these have been used theyare explained in the accounting policies below. Basis of consolidation The consolidated financial statements incorporate the accounts of the Companyand each of its subsidiaries for the financial year. The results of subsidiariesor businesses acquired or disposed of during a financial year are included inthe consolidated income statement from or up to the effective date ofacquisition or disposal. Goodwill Goodwill arising on acquisitions is capitalised and subject to annual impairmentreviews. Goodwill represents the difference between the fair value of theconsideration paid and the fair value of the assets and liabilities acquired.Where the consideration includes an element contingent on one or more futureevents, the consideration includes an estimate of the fair value of the amountsexpected to be paid in the future. Goodwill is stated at cost less accumulatedimpairment losses. The profit or loss on disposal of a business does not include any attributablegoodwill arising on acquisitions made before 1 February 1998, which waspreviously eliminated against reserves under the former Group policy. Goodwillacquired from 1 February 1998 to 31 March 2004 was capitalised and amortisedover its useful economic life. As permitted under IFRS1, in respect of acquisitions prior to 1 April 2004, theclassification and accounting treatment of business combinations has not beenamended on transition to IFRS. Intangible assets other than goodwill These consist mainly of purchased customer databases and computer software,which are carried at cost less accumulated amortisation calculated on astraight-line basis over their useful economic lives. Property, plant and equipment Property, plant and equipment is stated at cost less accumulated depreciation.Until 31 March 2004, freehold buildings were stated at valuation lessaccumulation depreciation. As permitted under IFRS1, on the transition to IFRSthe revalued amount has been treated as deemed cost at the date of therevaluation. Depreciation is provided on a straight-line basis at rates which, in the opinionof the Directors, reduce the assets to their residual values over theirestimated useful lives. Assets held under finance leases are depreciated overthe shorter of the lease terms and the useful lives of equivalent owned assets.Freehold land is not depreciated. The rates of depreciation applied are: Freehold buildings 2% Leasehold improvements 11% IT equipment 25%-33.3% Fixtures and fittings 15%-20% Motor vehicles 25% Trade and other receivables Trade and other receivables are recognised initially at fair value. A provisionfor impairment of trade and other receivables is made when there are indicationsthat the Group will not be able to collect all amounts due according to theoriginal terms of the receivables concerned. Revenue Revenue represents commissions, retained brokerage, fees and administrationcharges earned by subsidiary undertakings. Commission income, which accounts forthe majority of the Group's income and principally arises in the networkservices and financial services business segments, comprises commissionsreceivable on inception of a new policy or investment product ('initialcommissions') and commission payable on renewal ('renewal commissions'). Initialcommissions are accounted for when the policy is issued by the product providerafter taking account of provisions for the potential cancellation of policieswhere commission is received under indemnity terms. Renewal commissions areaccounted for when received. Income in respect of insurance brokerage, isrecognised at the inception date of the policy or when the policy placement hasbeen completed and confirmed, whichever is later. Fees for financial advice andadministration charges are accounted for as invoiced with accruals being madefor work performed but not invoiced. Taxation Corporation taxes are payable on taxable profits at current rates. Deferred taxis provided on temporary differences between the carrying amount of assets andliabilities for financial reporting purposes and the amount used for taxationpurposes, except that the recognition of deferred tax assets is limited to theextent that the Group anticipates making sufficient taxable profits in thefuture to absorb the reversal of the underlying timing differences. Tax is recognised in the income statement except to the extent that it relatesto items recognised directly to equity, in which case it is recognised inequity. Pension costs In respect of the Group's defined benefit scheme, assets are measured at theirfair value and liabilities are measured on an actuarial basis using theprojected unit credit method. Any surplus or deficit of scheme assets overliabilities is recognised as an asset or liability in the balance sheetrespectively. The current service cost and any past service costs together withthe expected return on scheme assets less the unwinding of discount on thescheme liabilities is charged to operating expenses. As permitted under IFRS1,all actuarial gains and losses at 1 April 2004, the date of transition to IFRS,were recognised. In respect of actuarial gains and losses that arise subsequentto this date, these are recognised in full in the period in which they occuroutside the income statement and presented as part of the total recognisedincome (expense) in the reconciliation of total equity. Contributions to the Group's defined contribution schemes are charged to theincome statement in the period in which they become payable. Leases Assets held under finance leases are capitalised at their fair value on theinception of the lease and depreciated over the shorter of the period of thelease and the estimated useful economic lives of the assets. The finance chargesare allocated over the period of the lease in proportion to the capital amountoutstanding and are charged to the income statement. Operating lease rentals are charged to the income statement in equal annualamounts over the lease term. This information is provided by RNS The company news service from the London Stock Exchange