Transition to IFRS
Date : 31 August 2005
This announcement provides further details of Serco's transition to IFRS. Separately today, we have announced our interim results and released our Business Review.
Introduction
During 2002, and in order to implement a "financial reporting strategy" adopted by the European Commission in June 2000, the European Union (EU) approved an Accounting Regulation requiring all EU listed companies to follow International Financial Reporting Standards ('IFRS') in their consolidated financial statements for financial years commencing on or after 1 January 2005. In accordance with these requirements, Serco Group plc (the 'Group') will adopt IFRS in its financial statements for the year ended 31 December 2005. These financial statements will include comparatives for the year ended 31 December 2004 restated under IFRS. The Group is required to report under IFRS for the first time in the Group's interim results for the six months ended 30 June 2005, with comparatives for the six months ended 30 June 2004.
There is no change to the Group's underlying performance under IFRS and, in particular, there is no impact on the Group's cash flow.
The restatements result in:
- an increase of £6.6m (11.5%) in 2004 full year profit before tax to £64.0m, and an increase of £2.6m (9.3%) for the six months ended 30 June 2004 to £30.7m
- a decrease of £135.2m (44.4%) in net assets at 31 December 2004 to £169.2m; and £27.0m (16.0%) decrease in net assets at 1 January 2005 to £142.3m on the recognition of financial instruments (see section 9)
Restatements and changes in disclosure arise primarily as a result of:
- inclusion of a proportionate share of joint ventures' financial performance and position;
- goodwill no longer being amortised;
- reclassification of franchise assets from goodwill to intangible assets;
- recognition of all employee benefit related assets and obligations, principally defined benefit pension schemes;
- inclusion of a fair value charge in relation to share-based payment;
- dividend liability recognised when approved;
- change in recognition of deferred tax; and
- recognition of certain financial instruments at fair value at 1 January 2005.