Form 20-F 2005

in August and November, the European potable water treatment operations of the Eco Services enterprise to Feralco AB
and Novasep, respectively;
in August, the North American phosphates business of the Novecare enterprise to Bain Capital;
in November, the chlorine production business, located in Staveley (United Kingdom) of the Novecare enterprise to Ineos
Chlore Ltd.; and
in December, the anesthetics business of the Organics enterprise to Nicholas Piramal India Ltd.
Disposals completed in 2005 generated a net loss of €46 million before tax, while disposals completed in 2004 generated a
€216 million net gain before tax, with the income tax charge amounting to €22 million.
In addition, in December 2004, we acquired the Chloralp Group from LaRoche Industries. As a result of the acquisition, the Chloralp
Group, Cevco and GIE Spiral, which were previously accounted for by the equity method, became fully consolidated.
The main businesses in the process of being sold as of December 31, 2005 were:
Nylstar: this 50% owned entity was classified under discontinued operations in 2004, pursuant to our commitment to a
disposal in connection with our withdrawal from the European textile business of Polyamide. We expect that the negotiations
under way with the Radici group should lead to a sale in 2006;
decorative coatings and adhesives (latex business): in November 2005, this Coatis segment business was subject to a sales
agreement with Hexion Specialty Chemicals Inc. and the disposal was completed in January 2006;
development and custom synthesis for the pharmaceuticals industry: in December 2005, Rhodia signed a letter of intent
with Shasun Chemicals & Drug Ltd. with a view to selling this Rhodia Pharma Solutions segment business and the disposal
was completed in March 2006;
spanish phosphates production business of the Corporate and Others segment: after having withdrawn from the phosphates
production business at Rieme in Belgium, we have been negotiating actively our withdrawal from this business since the
end of 2005.
Critical Accounting Estimates
The Consolidated Financial Statements were prepared for the first time in accordance with IFRS (International Financial Reporting
Standards), as adopted by the European Union. IFRS accounting standards include IFRS, IAS (International Accounting Standards)
and IFRIC (International Financial Reporting Interpretations Committee) interpretations. The standards and interpretations adopted
for the preparation of the 2005 Consolidated Financial Statements and the 2004 comparative financial statements are those
published in the Official Journal of the European Union (“OJEU”) at December 31, 2005 and whose application is mandatory as
of this date and those standards and interpretation which Rhodia has chosen to apply early. The principles adopted with respect
to the implementation of IFRS 1 First-time adoption of international financial reporting standards and the impacts arising from the
differences from the French accounting principles previously applied to the Group’s financial condition, results of operations and
cash flows are analyzed in Note 38 to the Consolidated Financial Statements. See Note 2 to the Consolidated Financial Statements
for additional information on our principal accounting methods.
The preparation of Consolidated Financial Statements requires us to make estimates that may affect the reported value of assets,
liabilities, income, expense and commitments. We believe that the accounting estimates we use are reasonable. However, the actual
amounts may differ from these estimates since even the best estimates require certain adjustments. Accordingly, we review the
accounting estimates used to prepare our Consolidated Financial Statements on a regular basis to ensure that they are reasonable.
Changes in these estimates may require us to record higher or lower expenses and may have a favorable or unfavorable impact
on our financial condition and cash flows. Final amounts are likely to differ from the estimates used in preparing the financial
statements.
Form 20 - F 2005 - Rhodia
39