Nichols plc Regulatory News (NICL)

30 Jul 2007 11:46

Nichols PLC30 July 2007 IFRS RESTATEMENT Nichols plc today publishes its analysis of the impact of InternationalFinancial Reporting Standards (IFRS) on its results for 2006, together with areconciliation from UK Generally Accepted Accounting Principles (UK GAAP) toIFRS. In Summary • Profit before taxation on continuing activities for the year ended 31December 2006 has increased by £512,000 from £4,961,000 to £5,473,000. • Basic earnings per share for the year ended 31 December 2006 hasincreased from 15.94p to 17.10p • There is no impact on underlying cash flow. Restatement of financial information for 2006 under International FinancialReporting Standards (IFRS) Contents 1. Introduction 2. Basis of Preparation 3. First time adoption of IFRS 4. Review of the main changes arising from the transition from UK GAAP to IFRS 5. Restated unaudited preliminary comparative financial information 6. Statement of compliance 7. Accounting policies The following information is unaudited and may be subject to change. 1. Introduction Historically Nichols plc has prepared its consolidated financial statements inaccordance with UK Generally Accepted Accounting Principles (UK GAAP). As aresult of AIM rule changes, Nichols plc needs to prepare consolidated financialstatements in accordance with International Financial Reporting Standards(IFRS). This change applies to all accounting periods beginning on or after 1 January2007 for AIM listed companies. The group's first Interim Report under IFRS willbe for the six months ended 30 June 2007 and its first Annual Report under IFRSwill be for the year ended 31 December 2007. Prior period comparatives will berestated to comply with IFRS. These are shown in section 5 of this report. Summary of the financial effects of IFRS The main impact on the group's income statement is that goodwill is no longeramortised. Instead goodwill is to be reviewed for impairment annually. There have been a number of other effects but these are balance sheetreclassifications only. 2. Basis of Preparation The unaudited financial information presented in this document has been preparedon the basis of all International Financial Reporting Standards (IFRS) expectedto be applicable for the group's 2007 reporting period. These are subject toongoing review and possible amendment. Further standards and/ orinterpretations may be issued that could apply to 2007. If any such amendments,new standards or new interpretations are issued these may require the financialinformation provided in this document to be modified accordingly. The group will also continue to review its accounting policies in light ofemerging industry consensus on the practical application of IFRS. This couldalso mean that the financial information provided in this document may requiremodification until the first complete set of audited IFRS financial statementsare completed for the year ended 31 December 2007. 3. First Time Adoption of IFRS The rules for first time adoption of IFRS are set out in IFRS 1 "First TimeAdoption of International Financial Reporting Standards". In general a companyis required to define its IFRS accounting policies and apply themretrospectively. IFRS 1, does however, allow a company to take advantage of anumber of exemptions from restating historical data in certain instances. Theonly exemption affecting the group is IFRS 3, which is set out below. i. IFRS 3 Business Combinations IFRS 3 prohibits merger accounting and the amortisation of goodwill. Thestandard requires goodwill to be carried at cost with impairment reviews bothannually and when there are indications that the carrying value may not berecoverable. Under the transitional arrangements of IFRS 1 a company has the option ofapplying IFRS 3 prospectively from the IFRS transition date. Nichols plc haschosen this option rather than to restate all previous business combinations.Accordingly acquisitions prior to 1 January 2006 have not been restated for theeffects of IFRS 3. The impacts of IFRS 3 and associated transition arrangementson Nichols plc are as follows: • All prior business combination accounting is frozen at the transitiondate and • The value of goodwill is frozen at 1 January 2006 and amortisationpreviously reported under UK GAAP is added back for 2006 IFRS restatements. The operating profit impact in 2006 is a reduction in the amortisation charge of£512,000. There is a corresponding deferred tax adjustment of £86,000. ii. IAS 19 Retirement Benefits The rules for IAS 19 are similar to those of FRS 17. The main difference is theaccounting treatment of the deferred tax asset/ liability relating to thepension scheme asset/ liability. Under FRS 17 the pension scheme surplus or deficit is shown net of the relateddeferred tax. Under IAS 19 the pension surplus or deficit is shown separatelyfrom other net assets on the balance sheet and the deferred tax is shown withother deferred tax balances. iii. Presentation of the Financial Statements The financial information provided in this document has been presented in amanner consistent with the requirements of IFRS and thus the format of primaryschedules such as the income statement (profit and loss account) and the balancesheet differ from those under UK GAAP. Generally the presentation rules of IFRSare less prescriptive than those under UK GAAP. The group has thereforeendeavoured to interpret the IFRS requirements in a manner that provides userswith clear and concise information. iv. Cash There is no impact upon the underlying cash balances within the business as aresult of the adoption of IFRS. 4. Review of the Main Changes arising from the Transition from UK GAAP toIFRS The following explains the major adjustments from the transition to IFRS. Itdoes not attempt to explain all adjustments, only those having a significanteffect on the group's financial performance or financial position. i. IFRS 3 - Business Combinations Requirements of IFRS a) Under IFRS 3 goodwill is no longer amortised but is instead subject toannual impairment testing. b) IFRS 3 requires intangible assets to be identified separately from goodwillprovided they meet the IFRS definition of an intangible asset and provided theirfair value can be measured reliably. There are no significant separatelyidentifiable assets within Nichols plc. Impact on the Group a) The group has reversed the goodwill amortisation charged in the UK GAAPaccounts for the year ended 31 December 2006. Impact £'000s June 2006 December 2006Impact on profit before tax +256 +512Deferred tax -43 -86Impact on profit for the year +213 +426 ii. IAS 19 - Retirement Benefits Requirements of the IFRS Under IAS 19 the pension deficit is no longer shown net of deferred tax and thedeferred tax is shown with the other deferred tax balances. Impact on the Group Impact £'000s December 2005 June December 2006 2006Impact on deferred tax +2,102 +2,102 +1,951Impact on pension liability -2,102 -2,102 -1,951 5. Restated Preliminary Comparative Financial Information - Unaudited Consolidated Income Statement - Reconciliation For the half year ended 30 June 2006 UK GAAP Goodwill Pension IFRS 2006 ADJ ADJ 2006 £'000 £'000 £'000 £'000Revenue 26,188 26,188Cost of sales (12,050) (12,050)Gross profit 14,138 14,138 Operating expenses (14,058) 256 (13,802) Operating profit 80 256 0 336 Profit on disposal of non-current assets 128 128Finance income 86 86Finance charges (121) (121) Profit before tax 173 256 0 429 Taxation (336) (43) (379) Profit from continuing activities (163) 213 0 50 Profit on disposal of discontinued operations 2,038 2,038 Profit for the period 1,875 0 0 2,088 Earnings per share - basic 5.11p 5.69pEarnings per share - diluted 5.09p 5.67p Consolidated Income Statement - Reconciliation For the year ended 31 December 2006 UK GAAP Goodwill Pension IFRS 2006 ADJ ADJ 2006 £'000 £'000 £'000 £'000Revenue 52,296 52,296Cost of sales (24,764) (24,764)Gross profit 27,532 27,532 Operating expenses (22,757) 512 (22,245) Operating profit 4,775 512 0 5,287 Profit on disposal of non-current assets 128 128Finance income 156 156Finance charges (98) (98) Profit before tax 4,961 512 0 5,473 Taxation (1,152) (86) (1,238) Profit from continuing activities 3,809 426 0 4,235 Profit on disposal from discontinued operations 2,038 2,038 Profit for the period 5,847 426 0 6,273 Earnings per share - basic 15.94p 17.10pEarnings per share - diluted 15.92p 17.08p 2006 Interim Consolidated Balance Sheet - Reconciliation As at 30 June 2006 UK GAAP Goodwill Pension IFRS 2006 ADJ ADJ 2006 £'000 £'000 £'000 £'000ASSETSNon-current assetsProperty, plant and equipment 4,053 4,053Goodwill 9,248 256 9,504Deferred tax asset - (43) 2,168 2,125Total non-current assets 13,301 213 2,168 15,682 Current assetsInventories 3,053 3,053Trade and other receivables 17,599 17,599Cash and cash equivalents 2,448 2,448Total current assets 23,100 23,100 Total assets 36,401 213 2,168 38,782 LIABILITIESCurrent liabilitiesTrade and other payables 11,979 11,979Current tax payable 1,118 1,118Total current liabilities 13,097 0 0 13,097 Non-current liabilitiesRetirement benefit obligations 4,406 2,102 6,508Deferred tax liabilities (66) 66 0Provisions 2,353 2,353Total non-current liabilities 6,693 0 2,168 8,861 Total liabilities 19,790 0 2,168 21,958 Net assets 16,611 213 0 16,824 EQUITYShare capital 3,697 3,697Share premium 3,255 3,255Other reserves 511 511Retained earnings 9,148 213 9,361Total equity 16,611 213 0 16,824 2006 Consolidated Balance Sheet - Reconciliation As at 31 December 2006 UK GAAP Goodwill Pension IFRS 2006 ADJ ADJ 2006 £'000 £'000 £'000 £'000ASSETSNon-current assetsProperty, plant and equipment 3,179 3,179Goodwill 9,112 512 9,624Deferred tax asset - (86) 1,978 1,892Total non-current assets 12,291 426 1,978 14,695 Current assetsInventories 2,169 2,169Trade and other receivables 12,364 12,364Cash and cash equivalents 7,460 7,460Total current assets 21,993 0 0 21,993 Total assets 34,284 426 1,978 36,688 LIABILITIESCurrent liabilitiesTrade and other payables 8,366 8,366Current tax payable 598 598Total current liabilities 8,964 0 0 8,964 Non-current liabilitiesRetirement benefit obligations 4,553 1,951 6,504Deferred tax liabilities (27) 27 0Provisions 1,211 1,211Total non-current liabilities 5,737 0 1,978 7,715 Total liabilities 14,701 0 1,978 16,679 Net assets 19,583 426 0 20,009 EQUITYShare capital 3,697 3,697Share premium 3,255 3,255Other reserves 722 722Retained earnings 11,909 426 12,335Total equity 19,583 426 0 20,009 2005 Consolidated Balance Sheet - Reconciliation As at 1 January 2006 UK GAAP Goodwill Pension IFRS 2005 ADJ ADJ 2005 £'000 £'000 £'000 £'000ASSETSNon-current assetsProperty, plant and equipment 13,563 13,563Goodwill 9,504 9,504Deferred tax asset - 1,305 1,305Total non-current assets 23,067 1,305 24,372 Current assetsInventories 3,972 3,972Trade and other receivables 14,592 14,592Cash and cash equivalents 0 0Total current assets 18,564 18,564 Total assets 41,631 1,305 42,936 LIABILITIESCurrent liabilitiesBank overdraft 2,886 2,886Loans and borrowings 2,672 2,672Trade and other payables 11,202 11,202Current tax payable 772 772Total current liabilities 17,532 17,532 Non-current liabilitiesLoans and borrowings 750 750Retirement benefit obligations 4,906 2,102 7,008Deferred tax liabilities 797 (797) 0Provisions 655 655Total non-current liabilities 7,108 1,305 8,413 Total liabilities 24,640 1,305 25,945 Net assets 16,991 0 16,991 EQUITYShare capital 3,697 3,697Share premium 3,255 3,255Other reserves 551 551Retained earnings 9,488 9,488Total equity 16,991 0 16,991 6. Statement of Compliance IFRS 1 First Time Adoption of IFRS AdoptedIFRS 2 Share Based Payments AdoptedIFRS 3 Business Combinations AdoptedIFRS 4 Insurance Contracts No impact on the financial statementsIFRS 5 Non-current assets held for sale and Discontinued Operations No impact on the financial statementsIFRS 6 Exploration and Evaluation of Mineral Resources No impact on the financial statementsIFRS 7 Financial Instruments: Disclosures AdoptedIAS 1 Presentation of Financial Statements AdoptedIAS 2 Inventories AdoptedIAS 7 Cash flow statements AdoptedIAS 8 Accounting Policies, changes in accounting estimates and errors AdoptedIAS 10 Events after the balance sheet date AdoptedIAS 11 Construction Contracts AdoptedIAS 12 Income taxes AdoptedIAS 14 Segmental Reporting AdoptedIAS 16 Property, Plant and Equipment AdoptedIAS 17 Leases AdoptedIAS 18 Revenue AdoptedIAS 19 Employee Benefits AdoptedIAS 20 Accounting for Government Grants and Disclosure of Government Adopted AssistanceIAS 21 The effects of changes in Foreign Exchange rates AdoptedIAS 23 Borrowing costs No impact on the financial statementsIAS 24 Related party Disclosures AdoptedIAS 26 Accounting and reporting of Retirement Benefit Plans AdoptedIAS 27 Consolidation and Separate Financial Statements AdoptedIAS 28 Investments in Associates No impact on the financial statementsIAS 29 Financial Reporting in Hyperinflationary Economies No impact on the financial statementsIAS 31 Interests in Joint Ventures No impact on the financial statementsIAS 32 Financial Instruments: Presentation AdoptedIAS 33 Earnings per share AdoptedIAS 34 Interim Financial Reporting AdoptedIAS 36 Impairment of Assets AdoptedIAS 37 Provisions, Contingent Liabilities and Contingent Assets AdoptedIAS 38 Intangible Assets AdoptedIAS 39 Financial Instruments: Recognition and Measurement AdoptedIAS 40 Investment Property No impact on the financial statementsIAS 41 Agriculture No impact on the financial statements The following International Financial Reporting Interpretations Committee(IFRIC) pronouncements are effective but have not been adopted early by thegroup: IFRIC 8 Scope of IFRS 2 IFRIC 10 Interim financial reporting and impairment The following IFRIC pronouncements are not yet effective and have not beenadopted early by the group: IFRIC 11 IFRS 2 group and treasury share transactions IFRIC 12 Service concession arrangements IFRIC 13 Customer loyalty programmes IFRIC 14 The limit on a defined benefit asset, minimum fundingrequirements and their interaction. 7. Accounting Policies Basis of preparation Year end consolidated financial statements will be prepared in accordance withInternational Financial Reporting Standards (IFRSs) as issued by theInternational Accounting Standards Board (IASB). The financial statements have been prepared on the historical cost basis. Historically Nichols plc has prepared its consolidated financial statements inaccordance with UK Generally Accepted Accounting Principles (UK GAAP). As aresult of AIM rule changes, Nichols plc needs to prepare consolidated financialstatements in accordance with International Financial Reporting Standards. Thecomparative information has been restated in accordance with IFRS. The date oftransition to IFRS is 1st January 2006. The accounting policies have been applied consistently by the group. The preparation of financial statements requires management to make judgements,estimates and assumptions that affect the application of accounting policies andthe reported amounts of assets, liabilities, income and expenses. Actualresults may differ from the estimates. The key estimates and assumptionsapplied by management are set out below: (i) future cash flows and discount rates used in the "value in use" goodwillimpairment test. (ii) assumptions on the expected life of share options, volatility of shares,risk free yield to maturity and expected dividend yield on shares used in theIFRS fair value of share options. (iii) for the defined benefit scheme, the main assumptions used by the actuaryare the rate of increase in salaries, the rate of increase in pensions inpayment, the discount rate and the rate of inflation. (iv) expected useful life of non-current assets. Estimates and underlying assumptions are reviewed on an ongoing basis.Revisions to accounting estimates are recognised in the period in which theestimate is revised and in any future periods affected. Basis of consolidation The group financial statements consolidate those of the company and all of itssubsidiary undertakings drawn up to 31 December 2007. Subsidiaries are entitiesover which the group has the power to control the financial and operatingpolicies so as to obtain benefits from their activities. Intra-group balances, and any unrealised income and expenses arising fromintra-group transactions, are eliminated in preparing the consolidated financialstatements. All group companies have coterminous year ends. Acquisitions of subsidiaries are dealt with by the purchase method. Thepurchase method involves the recognition at fair value of all identifiableassets and liabilities at the acquisition date, regardless of whether or notthey were recorded in the financial statements of the subsidiary prior toacquisition. On initial recognition, the assets and liabilities of thesubsidiary are included in the consolidated balance sheet at their fair values,which are also used as the bases for subsequent measurement in accordance withgroup accounting policies. Goodwill is stated after separating out identifiableassets. Goodwill represents the excess of acquisition costs over the fair valueof the group's share of the identifiable net assets of the acquired subsidiaryat the date of acquisition. The group has elected not to apply IFRS 3 Business Combinations retrospectivelyto business combinations prior to 1st January 2006. First time application of IFRS IFRS 1 "First Time Adoption of IFRS" sets out the procedures that the group mustfollow when it adopts IFRS for the first time as the basis for preparing itsconsolidated financial statements. The group has established its IFRS accounting policies as at 31 December 2007,and has applied these retrospectively to determine the IFRS opening balancesheet at its date of transition, 1 January 2006. This standard provides anumber of optional and mandatory exemptions to this general principle. The onlyexemption adopted by the group is IFRS 3, which is set out below. Business combinations (IFRS 3) The group has elected not to apply IFRS 3 to the business combinations that tookplace before the date of transition. Accordingly, combinations prior to 1January 2006 have not been restated. As a result the carrying value of goodwillis frozen as at 1 January 2006, but accounted for thereafter in accordance withIFRS. Revenue Revenue from the sale of goods is measured at the fair value of theconsideration received or receivable, net of returns and allowances, tradediscounts, volume discounts and excluding VAT. Revenue is recognised when thesignificant risks and rewards of ownership have been transferred to the buyer,recovery of the consideration is probable, the associated costs and possiblereturn of goods can be estimated reliably and there is no continuing managementinvolvement with the goods. Transfer of risks and rewards vary depending on the individual term of thecontract of sale. For sales of soft drinks in the UK, transfer occurs when theproduct is despatched to the customer. However, for some internationalshipments transfer occurs either upon loading the goods onto the relevantcarrier or when the goods have arrived in the overseas port. Share based payments The group issues equity-settled share based payments to certain employees. Thefair value, determined at the date of grant, is recognised as an expense. Thetotal amount to be expensed over the vesting period is determined with referenceto the fair value of options granted, excluding the impact of any non marketvesting conditions. Non market vesting conditions are included in theassumptions about the number of options expected to vest. At each balance sheetdate the group revises its estimate of the number of options expected to vest.It recognises the impact of revisions to original estimates, if any, in theincome statement, with a corresponding adjustment to equity. The proceedsreceived, net of any directly attributable transactions costs, are credited toshare capital and share premium when the options are exercised. Foreign currency transactions Transactions in foreign currencies are translated at the exchange rate ruling atthe date of the transaction. Monetary assets and liabilities denominated inforeign currencies at the reporting date are retranslated to the functionalcurrency at the exchange rate at that date. Any exchange differences arising on the settlement of monetary items or ontranslating monetary items at rates different from those at which they wereinitially recorded are recognised in the income statement in the period in whichthey arise. Exceptional items Exceptional items are material items which individually, or if of a similartype, in aggregate, need to be disclosed by virtue of their size or incidencebecause of their reference to understanding the group's financial performance. Taxation Income tax expense comprises current and deferred tax. Income tax expense isrecognised in the income statement except to the extent that it relates to itemsrecognised directly to equity, in which case it is recognised in equity. Current tax Current tax is the expected tax payable on the taxable income for the year,using rates, which are enacted or substantively enacted at the balance sheetdate, and any adjustment to tax payable in respect of previous years. Deferred tax Deferred tax is recognised using the liability method, with no discounting,providing for temporary differences between the carrying amounts of assets andliabilities for financial reporting purposes and the amounts used for taxationpurposes. Deferred tax is measured at the tax rates that are expected to beapplied to the temporary differences when they reverse, provided they areenacted or substantively enacted at the reporting date. A deferred tax asset is recognised to the extent that it is probable that futuretaxable profits will be available against which temporary differences can beutilised. Deferred tax assets are reviewed at each reporting date and arereduced to the extent that it is no longer probable that the related deferredtax benefit will be realised. Goodwill Goodwill representing the excess of the cost of acquisition over the fair valueof the group's share of the identifiable assets acquired, is capitalised andreviewed annually for impairment. Goodwill is carried at cost less accumulatedimpairment losses. Negative goodwill is recognised immediately afteracquisition in the income statement. Goodwill written off to reserves prior to the date of transition to IFRS remainsin reserves. There is no re-instatement of goodwill previously amortised on thetransition to IFRS. Goodwill previously written off to reserves is not writtenback to the income statement on subsequent disposal. Impairment The carrying values of the group's non-current assets are reviewed at eachreporting date to determine whether there is any indication of impairment.Goodwill is reviewed for impairment annually. All other non-current assets aretested for impairment whenever events or changes in circumstances indicate thatthe carrying amount may not be recoverable. If any such indication ofimpairment exists then the asset's recoverable amount is estimated. For the purposes of assessing impairment, assets are grouped at the lowestlevels for which there are separately identifiable cash flows (cash generatingunits). As a result, some assets are tested individually for impairment andsome are tested at a cash-generating unit level. An impairment loss is recognised if the carrying amount of an asset or itscash-generating unit exceeds its recoverable amount. The recoverable amount isthe higher of fair value, reflecting market conditions less costs to sell, andvalue in use. In assessing value in use, the estimated future cash flows arediscounted to their present value using the cost of capital that reflects thecurrent market assessments of the time value of money and the risks specific tothe asset. Impairment losses recognised in respect of cash-generating units areallocated first to reduce the carrying amount of any goodwill allocated to theunits and then to reduce the carrying amount of the other assets in the unit ona pro rata basis. Impairment losses are recognised in the income statement. Property, plant and equipment Items of property, plant and equipment are measured at cost less accumulateddepreciation and any provision for impairment. Cost includes expenditures that are directly attributable to the acquisition ofthe asset. The cost of replacing part of an item of plant, property and equipment isrecognised in the carrying amount of the item if it is probable that the futureeconomic benefits of the part will flow to the group and its costs can bemeasured reliably. The costs of the day-to-day servicing of the property, plantand equipment are recognised in the income statement as incurred. Depreciation is recognised in the income statement on a straight line basis overthe estimated useful lives of each part of an item of property, plant andequipment. Leased assets are depreciated over the shorter of the lease andtheir useful lives. Land is not depreciated. The estimated useful lives for the current and comparative periods are asfollows: Buildings 50 years Plant and equipment 4-10 years Material residual value estimates are updated at least annually. An impairment review will be performed on property, plant and equipment if it isbelieved that there is a significant difference between the recoverable amountand the measured cost less accumulated depreciation. Inventories Inventories are measured at the lower of cost and net realisable value. Thecost of inventories is based on the first-in first-out principle, and includesexpenditure incurred in acquiring the inventories and bringing them to theirexisting location and condition. Net realisable value is the estimated sellingprice in the ordinary course of business, less the costs of completion andselling expenses. Financial assets The group's financial assets comprise primarily cash, bank deposits and tradereceivables that arise from its operations. Trade receivables are recognised initially at fair value and subsequentlymeasured at amortised cost using the effective interest method, less provisionsfor impairment. A provision for impairment of trade receivables is establishedwhen there is evidence that the group will not be able to collect all amountsdue according to the original terms of the receivable. Financial liabilities The group's financial liabilities comprise trade payables. Financialliabilities are obligations to pay cash or other financial assets and arerecognised when the group becomes a party to the contractual provisions of theinstruments. Trade payables are initially measured at fair value and aresubsequently measured at amortised cost, using the effective interest ratemethod. Other financial instruments The group primarily uses forward currency contracts to manage its exposure tofluctuating foreign exchange rates. Upon initial recognition, attributabletransaction costs are recognised in the income statement when incurred. Theseinstruments are measured at fair value and any material movement is shown in theincome statement. Cash and cash equivalents For the purpose of the cash flow statement, cash and cash equivalents comprisedeposits with banks and bank and cash balances. Cash equivalents are short term, highly liquid investments that are readilyconvertible to known amounts of cash and which are subject to an insignificantrisk of changes in value. Lease payments Finance The economic ownership of a leased asset is transferred to the lessee if thelessee bears substantially all the risks and rewards related to the ownership ofthe leased asset. The related asset is recognised at the time of inception ofthe lease at the fair value of the leased asset or, if lower, the present valueof the minimum lease payments plus incidental payments, if any, to be borne bythe lessee. A corresponding amount is recognised as a finance leasingliability. The finance expense is allocated to each period during the leaseterm so as to produce a constant periodic rate of interest on the remainingbalance of the liability. Rent Payments All other leases are regarded as operating leases and the payments arerecognised in the income statement on a straight-line basis over the term of thelease. Lease incentives received are recognised as an integral part of thetotal lease expense, over the term of the lease. Pensions Defined contribution pension schemes Obligations for contributions to the group's defined contribution pension planare recognised as an expense in the income statement when they are due. Defined benefit pension scheme Scheme assets are measured at fair values. Scheme liabilities are measured onan actuarial basis using the projected unit method and are discounted atappropriate high quality bond rates. The surplus or deficit is presented withinnet assets on the balance sheet. The related deferred tax element is shownwithin other deferred tax balances. A surplus is recognised only to the extentthat it is recoverable by the group. The current service cost and costs fromsettlements and curtailments are charged against operating profit. Past servicecosts are spread over the period until the benefit increases vest. Interestamounts on the scheme liabilities are included in finance income/ charges.Actuarial gains and losses are recognised immediately through the statement ofrecognised income and expense (SORIE). This information is provided by RNS The company news service from the London Stock Exchange