Ebiquity Regulatory News (EBQ)

13 Oct 2006 09:09

Thomson Intermedia PLC13 October 2006 13 October 2006 Thomson Intermedia plc Transition to International Financial Reporting Standards Thomson Intermedia plc ('the Group', AIM: THN) will be reporting its financialresults in accordance with International Financial Reporting Standards (IFRS) asadopted by the European Union from 1 February 2006. The Group will be publishingunder IFRS its results for the six months to 31 July 2006 on 18 October 2006. This statement presents and explains the conversion of the results of the Groupas previously reported under UK Generally Accepted Accounting Principles (UKGAAP) onto an IFRS basis for the year ended 31 January 2006. The key changes for the Group are: • non-amortisation of goodwill • recognition and amortisation of purchased intangible assets • inclusion of a fair value charge in relation to employee share schemes • balance sheet reclassification of internally developed computer software to intangible assets. The net impact of these changes for the year ended 31 January 2006 was thatGroup Operating profit increased by £176,000 to £1.93m and basic earnings pershare increased from 6.99p to 7.59p. Full details are set out in this announcement. Enquiries: Thomson Intermedia plc 0208 466 5555David Trendle, Finance Director College HillAdrian Duffield/Ben Way 0207 457 2020 Restatement of financial information for International Financial ReportingStandards 1 Introduction Following a recent change to AIM rules, requiring AIM listed companies to complywith International Financial Reporting Standards for periods commencing on orafter 1 January 2007, in accordance with best practice Thomson Intermedia plc(the "Group") has decided to prepare its financial statements underInternational Financial Reporting Standards ("IFRS") with effect from the yearended 31 January 2006. The financial statements for the year ended 31 January 2006 have been restatedunder IFRS, adopting a 1 February 2005 transition date. This announcementpresents and explains the Group's results for the year ended 31 January 2006 asconverted from UK GAAP to IFRS. The first results to be published under IFRS will be for the 6 months to 31 July2006, which will be reported in an announcement to be issued on 18 October 2006. 2 Basis of preparation AIM rules require that financial statements be prepared in accordance withInternational Financial Reporting Standards (IFRS's) adopted for use in the EU("adopted IFRS's") for periods commencing on or after 1 January 2007. ThomsonIntermedia Plc has decided, in accordance with best practice, to adopt IFRSearly. This financial information will be prepared on the basis of the recognition andmeasurement requirements of IFRS's in issue that either are endorsed by the EUand effective (or available for early adoption) at 30 April 2007 (the Group'snew period end) or are expected to be endorsed and effective (or available forearly adoption) at 30 April 2007, the Group's first reporting date at which ithas elected to use adopted IFRS's. Based on these adopted IFRS's, the directorshave made assumptions about the accounting policies expected to be applied,which are as set out in note 6, when the first full IFRS financial statementsare prepared for the period ending 30 April 2007. In addition, the adopted IFRS's that will be effective (or available for earlyadoption) in the financial statements for the period ending 30 April 2007 arestill subject to change and to additional interpretations and therefore cannotbe determined with certainty. Accordingly, the accounting policies for thatannual period will be determined finally only when the financial statements areprepared for the period ending 30 April 2007. 3 Transition to IFRS - first time adoption IFRS 1 'First Time Adoption of International Financial Reporting Standards' setsout the procedures that the Group must follow when it adopts IFRS for the firsttime as the basis for preparing its consolidated financial statements. The Groupis required to establish its accounting policies as at its date of transition, 1February 2005 and, apply these prospectively to determine the IFRS balance sheetfor the year ended 31 January 2006. This standard permits companies adoptingIFRS for the first time to take certain exemptions from the full requirements ofIFRS during the transition period. As permitted under the transitionalprovisions of IFRS1, the exemptions adopted by the Group are set out below. • Share based payments The Group has adopted the exemption to apply IFRS 2 Share based payments only toawards made after 7 November 2002 that had not vested by 1 January 2005. • Business combinations The Group has chosen not to restate business combinations completed prior to thetransition date on an IFRS basis. • Financial Instruments The Group has adopted the exemption not to restate comparatives for IAS 32 andIAS 39 and therefore the comparative information in the 2007 financialstatements will be presented on the existing UK GAAP basis and will not berestated in line with IAS32 and IAS 39. • Cumulative translation differences Cumulative translation differences in respect of foreign operations have beendeemed to be nil at the date of transition. 4 Significant accounting policy changes and adjustments The following sets out significant accounting policy changes and adjustmentsarising from the transition to IFRS. I. Goodwill and impairments (IFRS 3) UK GAAP requires that amortisation of goodwill is charged to the profit and lossaccount on a straight line basis over the useful economic life of the intangibleasset. Under UK GAAP, the goodwill arising on the acquisitions of BCMG Limitedwas being amortised over 20 years. The charge in the year ended 31 January 2006under UK GAAP was £234,000. IFRS 3 requires that goodwill arising from business combinations should not beamortised but tested annually for impairment. As permitted by IFRS 1 the Group has decided to apply IFRS 3 prospectively fromthe date of transition (1 February 2005) and has elected not to restate previousbusiness combinations. Amortisation charged in the year ended 31 January 2006, under UK GAAP, relatingto goodwill on the balance sheet at the date of transition has been reversed,resulting in a credit to income of £234,000. II. Acquired Intangible Assets (IAS 38) IAS38 'Intangible Assets', establishes general principles for the recognitionand measurement of intangible assets. In addition, IFRS 3 'BusinessCombinations' stipulates that, if an intangible asset is acquired in a businesscombination, the cost of that intangible asset is its fair value at theacquisition date. The fair value of the assets will reflect market expectationsas to the economic benefits that will flow from it. IFRS requires that where the fair value of an intangible asset can be measuredreliably, the acquirer should recognise an intangible asset acquired in abusiness combination separately from goodwill, irrespective of whether the assetwas previously recognised by the acquiree. This will include, for example,customer relationships, trade names and non-compete agreements where these meetthe definition of an intangible asset, and can be measured reliably. On 23 August 2005 the Company acquired the entire share capital of BCMG Limited(billetts) for a maximum total consideration of £13.1m. In line with IAS 38intangible assets owned by billetts have been independently valued by anexternal consultant and shown within 'other intangible assets' on the balancesheet. Amortisation is charged so as to write off the cost of the purchased intangibleassets over their estimated useful lives, the assets and periods used are asfollows: Asset Asset value Useful £'000s economic life Yearsbilletts media consulting customer relationships 2,859 10billetts marketing sciences customer relationships 271 5MPMA customer relationships 43 2Trade name 215 10Non-compete 7 1.5 3,395 An amortisation charge of £162,000 has been debited through the income statementrepresenting the write down of these intangible assets from the acquisition dateto 31 January 2006. III. Share based payments (IFRS 2) With respect to share-based payments, under UK GAAP only the intrinsic value isexpensed over the performance period e.g. where the options are granted overshares with an exercise price below market price at the date of the grant. IFRS 2 requires that an expense for all equity-settled share based payments isrecognised. For share based payments under IFRS, the expense is calculated withreference to the fair value of the award on the date of grant and is spread overthe vesting period of the scheme, adjusted to reflect actual and expected levelsof vesting. The Black-Scholes model has been used to calculate the fair valuesof options on their grant date for all options issued after 7 November 2002which had not vested by 1 January 2005. A charge of £229,000 was incurred under UK GAAP for the year ended 31 January2006 due to share options issued below market value. The charge to the incomestatement under IFRS is the same as UK GAAP, based on the fair value of theshare options. However, a cumulative amount of £414,000 was previously creditedto accruals under UITF17, this has been transferred to the profit & lossreserve, as required by IFRS2. The charge in the 2006 income statement for all other options is £20,000. IV. Reclassification of research and development costs (IAS 38) Under IFRS an intangible asset arising from development (or from the developmentphase of an internal project) shall be recognised if, and only if, an entity candemonstrate all of the following: a) the technical feasibility of completing the intangible asset so that it willbe available for use or sale. (b) its intention to complete the intangible asset and use or sell it. (c) its ability to use or sell the intangible asset. (d) how the intangible asset will generate probable future economic benefits.Among other things, the entity can demonstrate the existence of a market for theoutput of the intangible asset or the intangible asset itself or, if it is to beused internally, the usefulness of the intangible asset. (e) the availability of adequate technical, financial and other resources tocomplete the development and to use or sell the intangible asset. (f) its ability to measure reliably the expenditure attributable to theintangible asset during its development. The Group has applied IAS 38 fully retrospectively and under IFRS £3.3m ofdevelopment expenditure over the last 5 years has been capitalised. This isprudently based on the expenditure incurred in the development of themethodologies and systems to create the innovative products and servicesprovided by Thomson. The estimated useful life of these developments has beenset at 5 years. This is a prudent estimate of the developments which form partof our Intellectual Property and where we continue to gain economic benefit fromthe development carried out over the last five years. This policy results in anadjustment of £2.66m of development expenditure capitalised as at the transitiondate with a cumulative amortisation charge of £909,000. The capitalisation andamortisation prior to the transition date is taken through reserves. In 2005/06development expenditure of £644,000 has been capitalised and £532,000amortisation has been charged relating to development expenditure capitalisedpreviously, creating a net credit to income of £112,000. V. Classification of cash and cash equivalents Under UKGAAP liquid resources were excluded from the cashflow statement. UnderIFRS the cashflow statement includes cash equivalents, defined as short-term,highly liquid investments that are readily convertible to known amounts of cashand which are subject to an insignificant risk of changes in value.Accordingly, short term deposits of £850,000 have been included within thebalance of cash and cash equivalents held at the date of transition and thetransfer of £515,000 from cash to liquid resources under UKGAAP has beenreversed in the IFRS cashflow statement for the year ended 31 January 2006. 5 Restatement of financial information under IFRS The financial information set out below has been prepared on the basis of theaccounting policies set out in note 6. An explanation of the effects oftransition to IFRS is provided above in note 4. Consolidated Income Statement - Effect of transition to IFRS 31 January 2006 UKGAAP Preliminary IFRS Preliminary IFRS Adjustments £'000s £'000s £'000s Revenue 11,136 11,136 Cost of Sales (4,129) (4,129) Gross Profit 7,007 7,007 Administrative expenses (4,775) 644 (4,131)Shared based expenses (229) (20) (249)Amortisation of intangible assets (246) (448) (694) Total administrative expenses (5,250) 176 (5,074) Operating Profit 1,757 176 1,933 Financial Income 49 49 Financial expenses (55) (55) Net financing income (6) (6) Profit before taxation 1,751 176 1,927Tax (126) (126)Deferred tax 430 430 Profit for the year 2,055 176 2,231 Attributable to:Equity holders of the parent 2,065 2,241Minority interests (10) (10) 2,055 2,231 Earnings per share (pence)Basic 6.99p 7.59pDiluted 6.67p 7.24p Consolidated Balance Sheet - As at 31 January 2006 Effect of transition to IFRS UK GAAP Preliminary IFRS Preliminary IFRS Adjustments £'000s £'000s £'000sNon Current assets Goodwill 11,054 (3,149) 7,905Other intangible assets 5,096 5,096Property plant and equipment 706 706Investments 122 122Deferred tax asset 910 910 12,792 1,947 14,739 Current assets Trade & other receivables: Due within one 5,926 5,926yearTrade & other receivables: Due after more 1,235 1,235than one yearCash & Cash Equivalents 2,774 2,774 9,935 9,935 Current liabilities Trade & other payables (2,041) (2,041)Current tax liabilities (126) (126)Bank overdrafts & loans (312) (312)Provisions (3,850) (3,850)Accruals & deferred income (4,393) 414 (3,979) (10,722) (10,308) Net current liabilities (787) (373) Non current liabilities Bank Loans (2,687) (2,687)Provisions (269) (269)Accruals & deferred income (1,374) (1,374) (4,330) (4,330) Total liabilities (15,052) 414 (14,638) Net assets 7,675 2,361 10,036 Capital & reserves Share capital 7,823 7,823Share premium 8,869 8,869Merger reserve (4,504) (4,504)Retained earnings (4,405) 2,361 (2,044) Minority interest (108) (108)Total Equity 7,675 2,361 10,036 Consolidated Balance Sheet - As at 31 January 2005 Effect of transition to IFRS UK GAAP Preliminary IFRS Preliminary IFRS Adjustments £'000s £'000s £'000sNon current assets Goodwill 31 31Other intangible assets - 1,751 1,751Property plant and equipment 518 518Deferred tax assets 480 480 1,029 1,751 2,780 Current assets Trade & other receivables: Due within oneyear 2,290 2,290Trade & other receivables: Due after morethan one year 2 2Cash & Cash Equivalents 1,598 1,598 3,890 3,890 Current liabilities Trade & other payables (848) (848)Accruals & deferred income (3,007) (3,007) (3,855) (3,855) Net current assets 35 35 Non current liabilities Accruals & deferred income (528) (528) (528) (528) Total liabilities (4,383) (4,383) Net assets 536 1,751 2,287 Capital & reserves Share capital 7,186 7,186Share premium 5,064 5,064Merger reserve (5,250) (5,250)Retained earnings (6,464) 1,751 (4,713) Total Equity 536 1,751 2,287 Consolidated Cash Flow Statement - As at 31 January 2006 Effect of transition to IFRS UK GAAP Preliminary IFRS Preliminary IFRS Adjustments £'000s £'000s £'000s Cashflows from operating activities 1,751 176 1,927 Profit before taxationAdjustments for:Depreciation 276 276Amortisation 246 448 694 Share based expenses 229 20 249Investment income - (49) (49)Interest expense - 55 55 2,502 650 3,152Increase in trade & otherreceivables (2,648) (6) (2,654)Increase in trade payables 1,385 1,385 Cash generated from operations 1,239 644 1,883 Interest expense (71) (71)Income taxes paid (6) (6)Net cash from operating activities 1,162 1,806 Cash from investing activities Purchase of subsidiary, net of cashacquired (7,012) (7,012)Purchase of property, plant &equipment (264) (264)Purchase of intangible assets - (644) (644)Investment in short term deposits (515) 515 -Purchase of investments (87) (87) Investment income 43 43 Net cash used in investingactivities (7,835) (7,964) Cashflows from financing activities Proceeds from issue of sharecapital 4,343 4,343Proceeds from long term borrowings 3,000 3,000Repayment of bank loans (63) (63) Net cashflow used in financingactivities 7,280 7,280 Net decrease in cash and cashequivalents 607 515 1,122Effect of foreign exchange rate (8) - (8)changes Cash & cash equivalents atbeginning of period 748 850 1,598Cash & Cash equivalents at end ofperiod 1,347 1,365 2,712 6 Significant Accounting Policies Basis of accounting The financial statements have been prepared in accordance with all adoptedInternational Financial Reporting Standards (IFRS's) for the first time. Thedisclosures required by IFRS 1 concerning the transition from UK GAAP to IFRS'sare given above. The financial statements have also been prepared in accordancewith IFRS's adopted for use in the European Union and therefore comply withArticle 4 of the EU IAS Regulation. The principal accounting policies adopted are set out below. Basis of consolidation The consolidated financial statements incorporate the financial statements ofthe Company and entities controlled by the Company (its subsidiaries) made up to31 January 2006. Control is achieved where the Company has the power to governthe financial and operating policies of an investee entity so as to obtainbenefits from its activities. Where necessary, adjustments are made to the financial statements ofsubsidiaries to bring the accounting policies used into line with those used bythe Group. All intra-group transactions, balances, income and expenses areeliminated on consolidation. Business combinations • Acquisition method of accounting The cost of the acquisition is measured at the aggregate of the fair values, atthe date of exchange, of assets given, liabilities incurred or assumed, andequity instruments issued by the Group in exchange for control of the acquiree,plus any costs directly attributable to the business combination. Theacquiree's identifiable assets, liabilities and contingent liabilities that meetthe conditions for recognition under IFRS 3 are recognised at their fair valueat the acquisition date. • Merger method of accounting Although IFRS 3 outlawed merger accounting, under IFRS 1, the Group is notrequired to re-state acquisitions or business combinations prior to the date oftransition. Therefore the Group is permitted to retain their historical mergeraccounting position in the consolidated accounts. The interest of minority shareholders in the acquiree is initially measured atthe minority's proportion of the net fair value of the assets, liabilities andcontingent liabilities recognised. Goodwill Goodwill arising on consolidation represents the excess of the cost ofacquisition over the Group's interest in the fair value of the identifiableassets and liabilities of a subsidiary. Goodwill is initially recognised as anasset at cost and is subsequently measured at cost less any accumulatedimpairment losses. Goodwill which is recognised as an asset is reviewed forimpairment at least annually. Any impairment is recognised immediately inprofit and loss and is not subsequently reversed. For the purpose of impairment testing, goodwill is allocated to each of theGroup's cash-generating units expected to benefit from the synergies of thecombination. Cash-generating units to which goodwill has been allocated aretested for impairment annually, or more frequently when there is an indicationthat the unit may be impaired. If the recoverable amount of the cash-generatingunit is less than the carrying amount of the unit, the impairment loss isallocated first to reduce the carrying amount of any goodwill allocated to theunit and then to the other assets of the unit pro-rata on the basis of thecarrying amount of each asset in the unit. An impairment loss recognised forgoodwill is not reversed in a subsequent period. In respect of the billetts transaction in August 2005, goodwill previouslycarried on the balance sheet at cost and amortised in accordance with UK GAAPhas been restated at cost and reviewed for impairment. Goodwill arising on other acquisitions before the date of transition to IFRS hasbeen retained at the previous UK GAAP amounts subject to being tested forimpairment at that date. Revenue recognition Revenue is measured at the fair value of the consideration received orreceivable and represents amounts receivable for services provided in the normalcourse of business, net of discounts, VAT and other sales related taxes. Incomeis recognised evenly over the period of the contract for subscription to systemsand in accordance with the stage of completion of the contract activity forconsultancy income. If the outcome of a contract could not be estimated reliably, the contractrevenue would be recognised to the extent of contract costs incurred that it isprobable would be recoverable. Costs are recognised as an expense in the periodin which they are incurred. Foreign currencies For the purposes of the consolidated financial statements, the results andfinancial position of each Group company are expressed in pounds sterling, whichis the functional currency of the Company, and the presentation currency for theconsolidated financial statements. In preparing the financial statements of the individual companies, transactionsin currencies other than the entity's functional currency (foreign currencies)are recorded at the rates of exchange prevailing on the dates of transactions.At each balance sheet date, monetary assets and liabilities that are denominatedin foreign currencies are retranslated at the rates prevailing on the balancesheet date. The exchange differences arising from the retranslation of the opening balancesheet amounts of subsidiaries and the difference on translation of the resultsof subsidiaries are dealt with through equity. All other exchange differencesare dealt with through the income statement. For the purpose of presenting consolidated financial statements, the assets andliabilities of the Group's foreign operations are translated at exchange ratesprevailing on the balance sheet date. Income and expense items are translatedat the average exchange rates for the period, approximating to rates applicableat the dates of the transactions. Operating profit Operating profit is stated after charging restructuring costs, but beforefinancial income and financial expenses. Taxation The tax expense included in the Consolidated Income Statement comprises currentand deferred tax. Current tax is the expected tax payable on the taxable incomefor the year, using tax rates enacted or substantively enacted by the balancesheet date. Tax is recognised in the Consolidated Income Statement except to the extent thatit relates to items recognised directly in equity, in which case it isrecognised in equity. Deferred tax is provided using the balance sheet liability method, providing fortemporary differences between the carrying amounts of assets and liabilities forfinancial reporting purposes and the amounts used for taxation purposes.Deferred tax is calculated at the tax rates that are expected to apply in theperiod when the liability is settled or the asset is realised. Deferred tax ischarged or credited in the Consolidated Income Statement, except when it relatesto items charged or credited directly to equity, in which case deferred tax isalso dealt with in equity. Deferred tax liabilities are recognised for all taxable temporary differencesand deferred tax assets are recognised to the extent that it is probable thattaxable profits will be available against which deductible temporary differencescan be utilised. The carrying amount of deferred tax assets is reviewed at each balance sheetdate and reduced to the extent that it is no longer probable that sufficienttaxable profits will be available to allow all or part of the asset to berecovered. Deferred tax assets and liabilities are offset against each other when theyrelate to income taxes levied by the same tax jurisdiction and when the groupintends to settle its current tax assets and liabilities on a net basis. Internally-generated intangible assets - research and development expenditure An internally-generated intangible asset arising from the Group's developmentexpenditure is recognised only if all of the following conditions are met: • An asset is created that can be identified (such as software); • It is probable that the asset created will generate future economic benefits; and • The development cost of the asset can be measured reliably. Internally-generated intangible assets are amortised on a straight-line basisover their useful lives. Where internally-generated intangible asset can not berecognised, development expenditure is recognised as an expense in the period inwhich it is incurred. Purchased intangible assets Externally acquired intangible assets are initially recognised at cost andsubsequently amortised on astraight-line basis over their useful economic lives. The amortisation expenseis included within theadministrative expenses line in the income statement. Intangible assets arerecognised on business combinations if they are separable from the acquiredentity or give rise to other contractual/legal rights. The amounts ascribed tosuch intangibles are arrived at by using appropriate valuation techniques.In-process research and development programmes acquired in such combinations arerecognised as an asset even if subsequent expenditure is written off because thecriteria specified in the policy for research and development costs above arenot met. The significant intangibles recognised by the group, their usefuleconomic lives and the methods used to determine the cost of intangiblesacquired in a business combination are as follows: billetts media consulting - customer Straight line over 10 years Estimated discounted cash flowrelationshipsbilletts marketing sciences - Straight line over 5 years Estimated discounted cash flowcustomer relationshipsMPMA customer relationships Straight line over 2 years Estimated discounted cash flowTrade name Straight line over 10 years Estimated royalty stream if rights were to be licensedNon-compete agreement Straight line over 1.5 years Estimated discounted cash flow of potentially lost revenue Plant and equipment Fixtures and equipment are stated at cost less accumulated depreciation and anyrecognised impairment loss. Depreciation is charged so as to write off the cost or valuation of assets overtheir estimated useful lives, the rates generally applicable are: Motor vehicles 25% per annum reducing balanceFurniture & fittings 25% per annum reducing balanceComputer equipment & software 25% per annum on costsPlant & equipment Straight line over 3-10 yearsOperating leases Over remaining useful life Impairment Assets that have an indefinite useful life are not subject to amortisation andare tested annually for impairment. Assets that are subject to amortisation ordepreciation are reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount may not be recoverable. If anysuch condition exists, the recoverable amount of the asset is estimated in orderto determine the extent, if any, of the impairment loss. Where the asset doesnot generate cash flows that are independent from other assets, estimates aremade of the cashflows of the cash generating unit to which the asset belongs. Recoverable amount is the higher of fair value, less costs to sell, and value inuse. In assessing value in use, estimated future cashflows are discounted totheir present value using a discount rate appropriate to the specific asset orcash generating unit. If the recoverable amount of an asset or cash generating unit is estimated to beless than its carrying amount, the carrying value of the asset or cashgenerating unit is reduced to its recoverable amount. Impairment losses arerecognised immediately in the income statement. In respect of assets other than goodwill, an impairment loss is reversed ifthere has been a change in the estimates used to determine the recoverableamount. An impairment loss is reversed only to the extent that the asset'scarrying amount does not exceed the carrying amount that would have beendetermined, net of depreciation or amortisation; if no impairment loss had beenrecognised. Impairment losses in respect of goodwill are not reversed. Financial instruments Financial assets The group classifies its financial assets into one of the following categories,depending on the purpose for which the asset was acquired. The group'saccounting policy for each category is as follows: Loans and receivables: These assets are non-derivative financial assets withfixed or determinable payments that are not quoted in an active market. Theyarise principally through the provision of goods and services to customers(trade debtors), but also incorporate other types of contractual monetary asset.They are carried at cost less any provision for impairment. Held-to-maturity investments: These assets are non-derivative financial assetswith fixed or determinable payments and fixed maturities that the group'smanagement has the positive intention and ability to hold to maturity. Theseassets are measured at amortised cost, with changes through the incomestatement. Financial liabilities The group classifies its financial liabilities as 'Other financial liabilities',which includes the following items: • Trade payables and other short-term monetary liabilities, which are recognisedat amortised cost. • Bank borrowings, and loan notes issued by the group are initially recognisedat the amount advanced net of any transaction costs directly attributable to theissue of the instrument. Such interest bearing liabilities are subsequentlymeasured at amortised cost using the effective interest rate method, whichensures that any interest expense over the period to repayment is at a constantrate on the balance of the liability carried in the balance sheet. "Interestexpense" in this context includes initial transaction costs as well as anyinterest or coupon payable while the liability is outstanding. Provisions Provisions are recognised when the Group has a present obligation as a result ofa past event, and it is probable that the Group will be required to settle thatobligation. Provisions are measured at the directors' best estimate of theexpenditure required to settle the obligation at the balance sheet date, and arediscounted to present value where the effect is material. Share-based payments The Group has applied the requirements of IFRS 2 'Share-based Payment'. Inaccordance with the transitional provisions, IFRS 2 has been applied to allgrants of options after 7 November 2002 that were unvested at 1 January 2005. The Group issues equity-settled share-based payments only. These are measuredat fair value (excluding the effect of non market-based vesting conditions) atthe date of grant. The fair value determined at the grant date of theequity-settled share-based payments is expensed on a straight-line basis overthe vesting period, with a corresponding credit to equity, based on the Group'sestimate of shares that will eventually vest and adjusted for the effect of nonmarket-based vesting conditions. Fair value is measured by use the Black-Scholes method. The expected life usedin the model has been adjusted, based on management's best estimated, for theeffects of non-transferability, exercise restrictions, and behaviouralconsiderations. Income Statement Year ended 31 January 2006 - Effect of transition to IFRS UK GAAP Amortisation of goodwill R&D expenditure reversal billetts Radio Capitalisation Amortisation monitoring £'000s £'000s £'000s £'000s £'000sRevenue 11,136Cost of sales (4,129) Gross Profit 7,007 Administration expenses (4,775) 644Share based expenses (229)Amortisation of intangible (246) 234 12 - (532)assets Total administrative expenses (5,250) 234 12 644 (532) Operating profit 1,757 234 12 644 (532) Finance income 49Finance expense (55) Net financing income (6) Profit before taxation 1,751 234 12 644 (532) Tax (126)Deferred tax 430Profit for the year 2,055 234 12 644 (532) Income Statement Year ended 31 January 2006 - Effect of transition to IFRS -Cont'd Share based Amortisation of Preliminary IFRS Preliminary IFRS expenses acquired intangible adjustments assets £'000s £'000s £'000s £'000sRevenue 11,136Cost of sales (4,129) Gross Profit 7,007 Administration expenses 644 (4,131)Share based expenses (20) (20) (249)Amortisation of intangible (162) (448) (694)assets Total administrative expenses (20) (162) 176 (5,074) Operating profit (20) (162) 176 1,933 Finance income 49Finance expense (55) Net financing income (6) Profit before taxation (20) (162) 176 1,927 Tax (126)Deferred tax 430Profit for the year (20) (162) 176 2,231 Balance Sheet As at 31 January 2006 - Effect of transition to IFRS UK GAAP Amortisation of goodwill R&D expenditure Share based expenses reversal Billetts Radio Capitalisation Amortisation monitoring £'000s £'000s £'000s £'000s £'000s £'000s £'000sNon current assets Goodwill 11,054 234 12 Other Intangible assets - 3,304 (1,441) Property plant & equipment 706 Investments 122 Deferred tax asset 910 12,792 234 12 3,304 (1,441) Current assets Trade & other receivables: 5,926 Due within one year Trade & other receivables: 1,235 Due after more than oneyear Cash & cash equivalents 2,774 9,935 Current liabilities Trade & other payables (2,041) Current tax liabilities (126) Bank overdrafts & loans (312) Provisions (3,850) Accruals & deferred income (4,393) (10,722) Net current liabilities (787) Non current liabilities Bank loans (2,687) Provisions for liabilities (269)& charges Accruals & deferred income (1,374) (4,330) Total liabilities (15,052) Net Assets 7,675 234 12 3,304 (1,441) Capital Reserves Share Capital 7,823 Share premium 8,869 Merger reserve (4,504) Retained earnings (4,405) 234 12 3,304 (1,441) (205) 205 Minority Interest (108) Toyal equity 7,675 234 12 3,304 (1,441) (205) 205 Balance Sheet As at 31 January 2005 - Effect of transition to IFRS - Cont'd NI for UITF17 Reclassification of Amortisation of Prelim IFRS Prelim IFRS phantom reclass goodwill to other acquired adjust's shares intangible assets intangible assets £'000s £'000s £'000s £'000s £'000s £'000sNon current assets Goodwill (3,395) (3,149) 7,905 Other Intangible assets 3,395 (162) 5,096 5,096 Property plant & 706equipment Investments 122 Deferred tax asset 910 - (162) 1,947 14,739 Current assets Trade & otherreceivables: 5,926Due within one year Trade & otherreceivables: 1,235Due after more than oneyear Cash & cash equivalents 2,774 9,935 Current liabilities Trade & other payables (2,041) Current tax liabilities (126) Bank overdrafts & loans (312) Provisions (3,850) Accruals & deferred (44) 458 414 (3,979)income - - (44) 458 414 (10,308) Net current liabilities (373) Non current liabilities Bank loans (2,687) Provisions (269) Accruals & deferred (1,374)income (4,330) Total liabilities (44) 458 414 (14,638) Net Assets (44) 458 (162) 2,361 10,036 Capital Reserves Share Capital 7,823 Share premium 8,869 Merger reserve (4,504) Retained earnings (44) 458 (162) 2,361 (2,044) Minority Interest (108) (44) 458 (162) 2,361 10,036 Balance sheet as at 31 January 2005 - Effect of transition to IFRS UK GAAP R&D expenditure Capitalisation Amortisation £000's £'000s £000'sNon current assets Goodwill 31 Other Intangible assets - 2,660 (909)Property plant & equipment 518 Deferred tax asset 480 1,029 2,660 (909) Current assets Trade & other receivables: Due within one year 2,290Trade & other receivables: Due after more than one year 2Cash & cash equivalents 1,598 3,890 Current liabilities Trade & other payables (848)Accruals & deferred income (3,007) (3,855) Net current assets 35 Non current liabilities Provisions for liabilities & -chargesAccruals & deferred income (528) (528) Total liabilities (4,383) Net Assets 536 2,660 (909) Capital & reserves Share Capital 7,186Share premium 5,064Merger reserve (5,250)Retained earnings (6,464) 2,660 (909) Total equity 536 2,660 (909) Balance sheet as at 31 January 2005 - Effect of transition to IFRS - Cont'd Share based expenses Preliminary IFRS Preliminary IFRS adjustments £'000s £'000s £'000s £'000sNon current assets Goodwill 31 Other Intangible assets 1,751 1,751Property plant & 518equipmentDeferred tax asset 480 1,751 2,780 Current assets Trade & otherreceivables: 2,290Due within one yearTrade & otherreceivables: 2Due after more than oneyearCash & cash equivalents 1,598 3,890 Current liabilities Trade & other payables (848)Accruals & deferred (3,007)income (3,855) Net current assets 35 Non current liabilities Provisions forliabilities & charges -Accruals & deferred (528)income (528) Total liabilities (4,383) Net Assets 1,751 2,287 Capital & reserves Share Capital 7,186Share premium 5,064Merger reserve (5,250)Retained earnings 13 (13) 1,751 (4,713) 13 (13) 1,751 2,287 This information is provided by RNS The company news service from the London Stock Exchange