28 Sep 2007 15:58
YOOMEDIA PLC
UPDATE ON ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS
YooMedia plc ('YooMedia') is preparing for the adoption of InternationalFinancial Reporting Standards as adopted by the European Union ('adopted IFRS')as its primary accounting basis for the year ending 31 December 2007. As partof this transition, YooMedia is today presenting unaudited financialinformation prepared in accordance with adopted IFRS for the year ended 31December 2006 and for the six months ended 30 June 2006. The purpose of thisstatement is to present the effects of adopted IFRS on the Group for 2006full-year and half-year comparative periods.
The principal changes to the Group's reported financial information under UK GAAP* arising from the adoption of IFRS are as a result of the following:
* the requirement to charge the income statement with the fair value of any
share options and warrants issued;
* the requirement not to amortise goodwill but to conduct annual impairment
reviews; and
* the requirement to apportion the convertible loans into both liability and
equity components by assessing the fair value of the debt component and to
calculate the interest expense by applying a rate that would have been
payable on a similar debt without any equity conversion option.
*throughout this statement 'UK GAAP' means the accounting standards and framework in issue at 31 December 2006, which were applied to the financial statements of the Group for the year ended 31 December 2006.
Details of adjustments arising from the transition to adopted IFRS are outlinedin the Key Impact Analysis section below. For the year ended 31 December 2006the expected impact of the adjustments is a reduction in the retained loss of ‚£0.1 million, and an increase in net assets of ‚£1.5 million. 28 September 2007Enquiries:YooMedia PLC +44 (0) 207 462 0870
Neil MacDonald, Managing Director
Nexus Financial Ltd +44 (0) 207 451 7068 Nicholas Nelson/Kathy Boate Nicholas.nelson@nexusgroup.co.uk Seymour Pierce Limited +44 (0) 207 107 8000 Mark Percy BASIS OF PREPARATIONThe financial information presented in this document has been prepared on thebasis of the recognition and measurement requirements of adopted IFRSs inissue. Based on these adopted IFRSs, the directors have made assumptions aboutthe accounting policies expected to be applied when the first annual IFRSfinancial statements are prepared for the year ending 31 December 2007. Thesignificant effects of these accounting policies are set out below.In addition, the adopted IFRSs that will be effective (or available for earlyadoption) in the annual financial statements for the year ending 31 December2007 are still subject to change and to additional interpretations andtherefore cannot be determined with certainty. Accordingly, the accountingpolicies for that annual period will be determined finally only when the annualfinancial statements for the Group are prepared for the year ending 31 December2007. The Group's financial results for the six month period ending 30 June2007 will be prepared on the basis of the principles of adopted IFRS, and willbe presented together with details of the accounting policies expected to beapplied for the year ending 31 December 2007.
IFRS 1 exemptions
IFRS 1, `First-time Adoption of International Financial Reporting Standards'sets out the procedures that the Group must follow when it adopts IFRS for thefirst time as the basis for preparing its consolidated financial statements. Asexplained above, the Group is required to establish what its adopted IFRSaccounting policies are expected to be as at 31 December 2007 and, in general,apply these retrospectively to determine the IFRS opening balance sheet at itsdate of transition, 1 January 2006 (the "transition date").
This standard provides a number of optional exceptions to this general principle. The most significant of these for the Group relates to business combinations that occurred before the opening IFRS balance sheet date (IFRS 3, `Business Combinations'). The Group has elected not to apply IFRS 3 retrospectively to business combinations prior to 1 January 2006.
KEY IMPACT ANALYSIS
The analysis below sets out the most significant adjustments to be made to thepreviously reported UK GAAP numbers arising from transition to adopted IFRS.The effects of these adjustments are then presented in the restated balancesheets as at 1 January 2006, 30 June 2006 and 31 December 2006, and in therestated income statements for the 6 months ended 30 June 2006 and the yearended 31 December 2006.
Adjustment (a) Share based payments
As at 1 January 2006 the company held a provision of ‚£862,000 in relation to acharge on unapproved share options under UITF 17. IFRS 2 requires the companyto charge the income statement with the fair value of the options issued andthis charge is spread over the vesting period of the option (which is typically2 years), the company has calculated the fair value using the Black-Scholesmethod. The result of the adjustments to reflect the change from UITF 17 toIFRS 2 is an increase in net assets of ‚£862,000 as at 31 December 2006 and anincrease in the loss for the year ended 31 December 2006 of ‚£539,000.
Adjustment (b) Employee Benefits
Under IAS 19, short-term benefits such as annual leave and sick leave, fallingdue within 12 months are required to be accrued at nominal value. A review ofunused holiday pay at each period end (including interim) and any other shortterm compensated absences (ie. sick leave) has resulted in a net decrease innet assets as at 31 December 2006 of ‚£23,000 and an increase in retained profitfor the year ended 31 December 2006 of ‚£44,000.
Adjustment (c)Goodwill and Intangible Assets
IFRS 3 'Business Combinations' requires that, when businesses are acquired, anyintangible assets acquired with the business are valued separately andcapitalised as an intangible asset. Any residual difference between theconsideration paid or payable and the net fair value of the identifiableassets, liabilities and contingent liabilities acquired is recognised asgoodwill. IFRS 3 also requires that goodwill is not amortised but is insteadsubject to an annual impairment review, whereas intangible assets are amortisedover their useful lives. As the Group has elected not to apply IFRS 3retrospectively to business combinations prior to 1 January 2006 under IFRS,the goodwill arising from combinations before that date therefore remain at theamount shown within goodwill under UK GAAP at 1 January 2006 so there is noimpact from those acquisitions on the 2006 opening balance sheet.As IFRS 3 requires that goodwill is not amortised, amounts previously amortisedin the 31 December 2006 accounts under UK GAAP of ‚£2,624,000 have been writtenback. Subject to IAS 36 the directors have identified cash generating unitswithin the business and reviewed for any possible impairment that may berequired. Following this review a goodwill amount of ‚£1.871m has been impairedin the year ended 31 December 2006. The net result of these two adjustments isan increase in net assets as at 31 December 2006 of ‚£753,000.
Adjustment (d)Financial Instruments
Under IAS 32, financial instruments are classified as financial liabilities andequity instruments. Compound financial instruments may contain both a liabilityand an equity component. YooMedia's convertible debt in the balance sheet as at31 December 2006 has been split into debt and equity components using fairvalue accounting principles. Interest is calculated by applying a rate thatwould have been payable on a similar debt without any equity conversion option.The effect of this adjustment has been a decrease in net assets of ‚£81,000 asat 31 December 2006 and an increase in the interest charge in the year ended 31December 2006 of ‚£152,000.YOOMEDIA PLC Previously IFRS 2 IAS 19 IFRS 3 IAS 32
Restated
Consolidated balance sheet stated IAS 36 under 1 January 2006 UK GAAP (a) (b) (c) (d) adopted IFRS ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Goodwill 43,980 43,980 Intangible assets 1,925 1,925 Property, plant & equipment 2,737 2,737 Investments 13 13 Non-current assets 48,655 - - - - 48,655 Trade & other receivables 7,634 7,634 Cash & cash equivalents 117 117 Current assets 7,751 - - - - 7,751 Trade & other payables 11,588 11,588 Short term borrowings 3,488 3,488
Provisions for liabilities & - 67
67charges Creditors < 1 year 15,076 - 67 - - 15,143 Net current assets/ ( 7,325) - ( 67) - - ( 7,392)(liabilities) Total assets less current 41,330 - ( 67) - - 41,263liabilites
Non current liabilities Interest bearings loans & 1,000 1,000borrowings Long term provisions 1,834 (862) 972 Other non current 1,697 1,697liabilities Net assets 36,799 862 ( 67) - - 37,594 Capital & reserves Issued capital 12,060 12,060 Shares to be issued 281 281 Share premium 75,521 75,521 Other reserves 455 508 963 Retained earnings ( 51,875) 354 ( 67) ( 51,588) 36,442 862 ( 67) - - 37,237 Minority interest 357 357 Total equity 36,799 862 ( 67) - - 37,594YOOMEDIA PLC Previously IFRS 2 IAS 19 IFRS 3 IAS 32 Restated
Consolidated balance sheet stated IAS 36
under 30 June 2006 UK GAAP (a) (b) (c) (d) adopted IFRS ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Goodwill 42,594 1,336 43,930 Intangible assets 1,886 1,886
Property, plant & equipment 3,014
3,014 Investments 1,493 1,493 Non-current assets 48,987 - - 1,336 - 50,323
Trade & other receivables 7,767
7,767 Cash & cash equivalents 401 401 Current assets 8,168 - - - - 8,168 Trade & other payables 14,763 14,763 Short term borrowings - -
Provisions for liabilities & - 52
52charges Creditors < 1 year 14,763 - 52 - - 14,815 Net current assets/ ( 6,595) - (52) - - ( 6,647)(liabilities) Total assets less current 42,392 - ( 52) 1,336 - 43,676liabilites
Non current liabilities Interest bearings loans & 6,522 ( 39)
6,483borrowings Long term provisions 1,731 (862) 869
Other non current liabilities 1,977
1,977 Net assets 32,162 862 ( 52) 1,336 39 34,347 Capital & reserves Issued capital 12,482 12,482 Shares to be issued 281 281 Share premium 76,490 76,490 Other reserves 759 762 71 1,592 Retained earnings ( 57,850) 100 ( 52) 1,336 ( 32) ( 56,498) 32,162 862 ( 52) 1,336 39 34,347 Minority interest - - Total equity 32,162 862 ( 52) 1,336 39 34,347YOOMEDIA PLC Previously IFRS2 IAS19 IFRS3 IAS32 Restated Consolidated income statement stated IAS 36 under 6 months ended 30 June 2006 UK GAAP (a) (b) (c) (d) adopted IFRS ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Revenue 31,233 31,233 Cost of sales ( 28,352) ( 28,352) Gross profit 2,881 - - - - 2,881 Administrative expenses ( 5,088) 15 ( 5,073)
Loss before interest, tax, ( 2,207) - 15 - - ( 2,192) depreciation, amortisation and
exceptionals Depreciation ( 817) ( 817) Amortisation of deferred ( 625) ( 625)development costs Amortisation of goodwill ( 1,336) 1,336 - Share based payment charge - (254) (254) Total depreciation, ( 2,778) (254) - 1,336 - ( 1,696)
amortisation & exceptionals Total administrative costs ( 7,866) (254) 15 1,336 - ( 6,769) Operating loss ( 4,985) (254) 15 1,336 - ( 3,888) Finance income 1 1 Finance expense ( 991) ( 32) (1,023) Loss on ordinary activities ( 5,975) (254) 15 1,336 ( 32) (4,910)before taxation Taxation - - Loss for period ( 5,975) (254) 15 1,336 ( 32) ( 4,910) YOOMEDIA PLC Previously IFRS 2 IAS 19 IFRS 3 IAS 32 Restated Consolidated balance sheet stated IAS 36 under 31 December 2006 UK GAAP (a) (b) (c) (d) adopted IFRS ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Goodwill 24,768 753 25,521 Intangible assets 1,378 1,378 Property, plant & equipment 2,123 2,123 Investments 18 18 Non-current assets 28,287 - - 753 - 29,040 Trade & other receivables 6,591 6,591 Cash & cash equivalents 139 139 Current assets 6,730 - - - - 6,730 Trade & other payables 9,536 9,536 Short term borrowings - -
Provisions for liabilities & - 23
23charges Creditors < 1 year 9,536 - 23 - - 9,559 Net current assets/ ( 2,806) - ( 23) - - ( 2,829)(liabilities) Total assets less current 25,481 - ( 23) 753 - 26,211liabilites
Non current liabilities Interest bearings loans & 5,437 81 5,518borrowings Long term provisions 1,210 ( 862) 348 Other non current liabilities 2,512 2,512 Net assets 16,322 862 ( 23) 753 ( 81) 17,833 Capital & reserves Issued capital 13,878 13,878 Shares to be issued 281 281 Share premium 78,755 78,755 Other reserves 759 1,047 71 1,877 Retained earnings ( 77,351) ( 185) ( 23) 753 ( 152) ( 76,958) 16,322 862 ( 23) 753 ( 81) 17,833 Minority interest - - Total equity 16,322 862 ( 23) 753 ( 81) 17,833YOOMEDIA PLC Previously IFRS2 IAS19 IFRS 3 IAS32 Restated Consolidated income statement stated IAS 36 under Year ended 31 December 2006 UK GAAP (a) (b) (c) (d) adopted IFRS ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Revenue 62,586 62,586 Cost of sales ( 54,171) ( 54,171) Gross profit 8,415 - - - - 8,415 Administrative expenses ( 9,302) 44 ( 9,258)
Loss before interest, tax, ( 887) - 44 - - ( 843) depreciation, amortisation and
exceptionals Depreciation ( 1,276) ( 1,276) Amortisation of deferred ( 1,252) ( 44) ( 1,296)development costs Amortisation of goodwill ( 2,668) 2,668 - Impairment of goodwill ( 14,512) (1,871) ( 16,383) Provision for bad debts ( 637) ( 637) Share based payment charge - (539) ( 539) Restructuring costs ( 2,988) ( 2,988) Total depreciation, ( 23,333) (539) - 753 - ( 23,119)amortisation & exceptionals Total administrative costs ( 32,635) (539) 44 753 - ( 32,377) Operating loss ( 24,220) (539) 44 753 - ( 23,962) Finance income 3 3 Finance expense ( 1,259) (152) ( 1,411) Loss on ordinary activities ( 25,476) (539) 44 753 (152) ( 25,370)before taxation Taxation - - Loss for financial year ( 25,476) (539) 44 753 (152) ( 25,370)
YOOMEDIA PLC