Form 20-F 2005

38. Note on transition to IFRS 2004
38.1 Context of the publication
As mentioned in Note 2.1, the Group’s Consolidated Financial Statements for the year ended December 31, 2005
were prepared for the first time in accordance with International Financial Reporting Standards (IFRS).
The comparative financial information for 2004 were prepared on the same basis.
The principal differences between the previously applied French GAAP and IFRS at the transition date (January 1, 2004) and
at December 31, 2004 are described in this note.
The preparation of the comparative 2004 financial information is based on the following:
- IFRS standards and interpretations which are mandatory at December 31, 2005;
- IFRS standards and interpretations mandatory after 2005 that the Group has decided to adopt early;
- options and exemptions that Rhodia used to prepare its first IFRS Consolidated Financial Statements in 2005.
38.2 Standards and interpretations applied for the preparation of the comparative financial information for 2004
Presentation of the standards applied
IFRS has been applied with retrospective effect in the opening balance sheet at the transition date (January 1, 2004), with the
exception of certain optional or mandatory exemptions specified in IFRS 1, First-time adoption of International Financial Reporting
Standards. These exemptions are presented below.
Description of the accounting options related to first-time adoption of IFRS.
In accordance with the provisions of IFRS 1, First-time adoption of International Financial Reporting Standards, which allows
first-time adopters to choose certain exemptions, Rhodia elected the following choices regarding the retrospective restatement of
assets and liabilities for the preparation of the IFRS opening balance at January 1, 2004:
- Business combinations: the Group elected not to apply IFRS 3, Business Combinations, retrospectively to business combinations
occurring before January 1, 2004. Accordingly, the carrying amount under French GAAP of assets acquired and liabilities assumed
in business combinations are the cost under IFRS at January 1, 2004. The Group tested goodwill for impairment by applying IAS
36, Impairment of Assets, at January 1, 2004. Goodwill was not impaired at January 1, 2004.
- Retirement and similar benefits: the Group elected to recognize unamortized actuarial liabilities at January 1, 2004 as a deduction
from equity. This adjustment results in a €663 million decrease in opening equity at January 1, 2004;
- Currency translation differences: the Group reclassified currency translation differences relating to the translation of foreign
subsidiaries’ financial statements at January 1, 2004 to the reserve for undistributed earnings. This reclassification has no impact
on total equity in the opening balance sheet. The IFRS currency translation differences are zero at January 1, 2004;
- Share-based payments: the Group elected to apply IFRS 2, Share-based payment, to account for share payment plans
granted on or after November 7, 2002 but not yet vested at January 1, 2005;
- Financial instruments: IAS 32, Financial instruments: disclosure and presentation, and IAS 39, Financial instruments:
recognition and measurement, have been applied from January 1, 2004;
- Property, plant and equipment: the Group elected not to use the exemption of IFRS 1 allowing it to revalue its property,
plant and equipment to fair value at the IFRS transition date. The Group’s property, plant and equipment therefore continue
to be carried at historical cost less depreciation and amortization and impairments.
- Discontinued operations: the Group elected to apply IFRS 5, Non-current assets held for sale and discontinued operations,
since January 1, 2004, as the valuations and other information needed to apply IFRS 5 were obtained at the time those
criteria were originally met.
For all other IFRSs, the entry values of the assets and liabilities at January 1, 2004 have been adjusted retrospectively as if
these standards had always been applied.
F-76 Form 20 - F 2005 - Rhodia