IAG annual report—Concise

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NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2005 NOTE 11. EVENTS SUBSEQUENT TO REPORTING DATE (CONTINUED) (c) International financial reporting standards (continued) (iii) Reconciliation of Australian GAAP to A-IFRS Provided below are reconciliations between the relevant balances under Australian GAAP and A-IFRS together with narrative descriptions explaining the adjustments. The reconciliations do not include the adjustments arising from the transition to the balance sheet approach for the calculation of taxation, because these adjustments had not yet been reliably determined. Reconciliation of equity under Australian GAAP to that under A-IFRS: NOTES PARENT 1 JULY 2005 $m PARENT 30 JUNE 2005 $m PARENT 1 JULY 2004 $m CONSOLIDATED 1 JULY 2005 $m CONSOLIDATED 30 JUNE 2005 $m CONSOLIDATED 1 JULY 2004 $m Total equity under Australian GAAP 4,440 4,440 4,295 4,440 4,440 4,224 Adjustments applicable from 1 July 2004 Adjustments to retained earnings Write-back of goodwill amortisation 1 n/a n/a n/a 92 92 n/a Recognition of defined benefit plans 2a n/a n/a n/a (32) (32) 57 Share based payment expense 2b - - - 5 5 2 Capitalisation of software development costs 3 n/a n/a n/a 24 24 n/a Valuation of property 4 n/a n/a n/a (9) (9) n/a Adjustments to contributed equity / reserves Recognition of share based payment reserve 2b - - - 11 11 4 Consolidation of share remuneration trusts 2b (33) (33) (20) (34) (34) (21) Adjustments applicable from 1 July 2005 Adjustments to retained earnings Valuation of investments 8 n/a n/a n/a 1 n/a n/a Reset preference shares transaction costs 7 5 n/a n/a 5 n/a n/a Reset preference shares distribution accrual 7 (1) n/a n/a (1) n/a n/a Adjustments to contributed equity / reserves Reset preference shares 7 (550) n/a n/a (550) n/a n/a Hedge accounting 9 n/a n/a n/a 7 n/a n/a Total equity under A-IFRS 3,861 4,407 4,275 3,959 4,497 4,266 The adjustments to equity noted above for the IAG Group include an increase in equity attributable to outside equity interests of $2 million as at 1 July 2005 and $5 million as at 1 July 2004. Reconciliation of net profit under Australian GAAP to that under A-IFRS for the year ended 30 June 2005: NOTES PARENT 30 JUNE 2005 $m CONSOLIDATED 30 JUNE 2005 $m Net profit before tax as reported under Australian GAAP 585 1,258 Write-back of goodwill amortisation 1 - 92 Movement in defined benefit plans 2a - (79) Share based payment expense 2b - 3 Capitalisation of software development costs 3 - 24 Valuation of property 4 - (9) Net profit before tax under A-IFRS 585 1,289 70 IAG Annual Report 2005
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2005 (iv) Explanation of the key differences Applicable from 1 July 2004 1) Goodwill No amortisation resulting in lower expenses, subject to impairment charges Goodwill supportable at 1 July 2004 and 30 June 2005 2) Employee benefits 2a) Superannuation plans Net position of defined benefit superannuation plans to be recognised The IAG Group will not restate the accounting for business combinations transacted prior to 1 July 2004, as permitted under the transitional provisions for first time adoption of A-IFRS. There are also no additional intangible assets to be recognised separately from goodwill upon first time adoption. Goodwill will not be amortised under A-IFRS and so the carrying value of goodwill as at 1 July 2004 of $1,455 million will be carried forward under A-IFRS subject to impairment testing. Part of that goodwill balance is denominated in New Zealand dollars and so the balance will continue to change reflecting foreign currency movements. The net goodwill as at 1 July 2004 has been systematically allocated to cash generating units for the purpose of the recoverability test, which is to be conducted at each reporting date. Any impairment is to be recognised in the statement of financial performance in the period in which it is identified. Using A-IFRS impairment methodology the $1,455 million goodwill balance is supportable at 1 July 2004, 31 December 2004, and 30 June 2005. Additional goodwill amounts have arisen through small acquisitions made during the year to 30 June 2005 totalling $9 million. Those amounts are also supportable at 31 December 2004 and 30 June 2005 using A-IFRS impairment methodology. The elimination of the requirement to amortise goodwill under A-IFRS will increase reported profits, subject to any impairment charge that may be required at a reporting date. The IAG Group had a goodwill amortisation expense for the year to 30 June 2005 of $92 million. That amount will be removed from the statement of financial performance under A-IFRS and the 1 July 2004 goodwill balance of $1,455 million will be reinstated, subject to impairment testing. That balance together with the goodwill amounts that arose from acquisitions made during the year will result in a goodwill balance as at 30 June 2005 of $1,464 million. The accounting for employee benefits will remain unchanged except for defined benefit superannuation arrangements and share based payments. The IAG Group has elected to early adopt the version of AASB 119 Employee Benefits issued in December 2004 to be effective from 1 January 2005 in line with the adoption of A-IFRS. Under A-IFRS the relevant net position of defined benefit plans will be recognised in the statement of financial position. The movement in the net position will be recognised in the statement of financial performance, except for actuarial gains and losses, which will be recognised directly in retained earnings, in line with the accounting option selected under AASB 119. 2b) Share based payments Initial reduction in the expense recognised The IAG Group has five arrangements that qualify as defined benefit plans under A-IFRS. These consist of a defined benefit superannuation plan in Australia, two defined benefit superannuation plans in New Zealand, and two pension schemes, both of which are unfunded. The net position of the three defined benefit superannuation plans is currently not recognised in the IAG Group’s statement of financial position although some information is disclosed in the notes to the annual financial report. The present value of each of the two unfunded pension liabilities is currently recognised in the IAG Group’s statement of financial position. It is important to note that the net position of the defined benefit superannuation plans calculated under A-IFRS is different to that calculated for purposes of note disclosure in accordance with Australian GAAP because of the use of different measurement requirements in the actuarial calculations of obligations to employee members. The principal difference is the discount rate applied to determine the present value of those obligations. The adjustments required to recognise the defined benefit plans under A-IFRS involve a credit to retained earnings as at 1 July 2004 of $57 million. Recognising the movement in the net positions of the plans for the year to 30 June 2005 involves recognition of an additional expense through the A-IFRS statement of financial performance for the year to 30 June 2005 of $79 million and the recognition of a $10 million debit directly to retained earnings as at 30 June 2005. The net result of these changes is a $32 million debit adjustment to retained earnings as at 30 June 2005. The net financial positions of the defined benefit plans as at 30 June 2005 have been calculated by independent actuaries, however the audit of all of the calculations had not been finalised as at the date of this report. The only transactions within the IAG Group that qualify as share based payments are share based remuneration payments. The IAG Group provides share based remuneration through four different plans each of which has different purposes and different rules. The change in accounting treatments has not led to a change in the structure of the share based remuneration because the current arrangements are considered to be most appropriate given the Group’s history, environment, culture and objectives. The IAG Group will not retrospectively apply the A-IFRS expense treatment to the Performance Share Rights Plan or the Employee Share Plan, as permitted under the transitional provisions for first time adoption of A-IFRS, because the last rights provided under those plans were granted prior to 7 November 2002. The A-IFRS transition changes will therefore impact on only the Performance Award Rights Plan (“PARs Plan”), and Non-Executive Director Share Plan (“NED Plan”), both of which are equity settled share based payments. 71
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IAG ANNUAL REPORT 2005 A RISK MANAG
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More than one in fi ve homes and on
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PAYING CLAIMS PAYING CLAIMS UNDERST
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UNDERSTANDING AND PRICING RISK PAYI
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MANAGING COSTS PAYING CLAIMS UNDERS
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REDUCING RISK PAYING CLAIMS UNDERST
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HOW INSURANCE WORKS PREMIUMS CLAIMS
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QUALITY PERFORMANCE It gives me gre
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PERFORMING IN A COMPLEX OPERATING E
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The next pages highlight some impor
Page 21 and 22: MEASURING THE SUSTAINABILITY OF OUR
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Page 25 and 26: CHRISTINE McLOUGHLIN BA, LLB HONS,
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Page 29 and 30: Drawing on the existing expertise i
Page 31 and 32: Customer satisfaction results demon
Page 33 and 34: MR GA (GEOFFREY) COUSINS Age 62 - I
Page 35 and 36: • Ensuring that reporting and dis
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Page 39 and 40: The roles and composition of the ex
Page 41 and 42: FINANCIAL REPORT CONTENTS 40 Five Y
Page 43 and 44: DIRECTORS’ REPORT The concise fin
Page 45 and 46: DIRECTORS’ REPORT Cash flows from
Page 47 and 48: DIRECTORS’ REPORT The following t
Page 49 and 50: DIRECTORS’ REPORT During the year
Page 51 and 52: DIRECTORS’ REPORT (b) Remuneratio
Page 53 and 54: DIRECTORS’ REPORT 2.7 Long Term I
Page 55 and 56: DIRECTORS’ REPORT 3. NON-EXECUTIV
Page 57 and 58: DIRECTORS’ REPORT 3.5 Retirement
Page 59 and 60: DIRECTORS’ REPORT ROUNDING OF AMO
Page 61 and 62: DISCUSSION AND ANALYSIS OF THE FINA
Page 63 and 64: CONSOLIDATED STATEMENT OF FINANCIAL
Page 65 and 66: NOTES TO THE FINANCIAL STATEMENTS F
Page 71: NOTES TO THE FINANCIAL STATEMENTS F
Page 79 and 80: SHAREHOLDER INFORMATION You can acc
Page 81 and 82: SHAREHOLDER INFORMATION IAGPA RESET
Page 83 and 84: GLOSSARY Actuary APRA An actuary ap
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