REUTERS GROUP PLC ANNUAL REPORT AND ACCOUNTS 1999

Accounting policiesAccounting basisThe financial statements are prepared underthe historical cost convention and inaccordance with applicable accountingstandards. The 1998 capital reorganisationwas accounted for using merger accountingprinciples in order to show a true and fairview.Basis of consolidationThe consolidated financial statementsinclude:a. The financial statements of Reuters GroupPLC and its subsidiaries to 31 December.The results of subsidiaries are included forthe period during which they are amember of the group.b. Reuters share of the post-acquisitionresults of associated undertakings andjoint ventures. Investments in associatedundertakings and joint ventures areincluded at Reuters share of the net assetsat the dates of acquisition plus the group’sshare of post-acquisition reserves.Foreign currency translationWhere it is considered that the functionalcurrency of an operation is sterling thefinancial statements are expressed in sterlingon the following basis:a. Fixed assets are translated into sterling atthe rates ruling on the date of acquisitionas adjusted for any profits or losses fromrelated financial instruments.b. Monetary assets and liabilitiesdenominated in a foreign currency aretranslated into sterling at the foreignexchange rates ruling at the balancesheet date.c. Revenue and expenses in foreigncurrencies are recorded in sterling at therates ruling for the month of thetransactions.d. Any gains or losses arising on translationare reported as part of profit.For other operations, associated undertakingsand joint ventures, assets and liabilities aretranslated into sterling at the rates ruling atthe balance sheet date. Revenue and expensesin foreign currencies are recorded in sterlingat the rates ruling for the month of thetransactions and gains or losses arising ontranslation are dealt with through reserves.TreasuryReuters receives revenue and incurs expensesin more than 60 currencies and uses financialinstruments to hedge a portion of its net cashflow and operating profit. Profits and lossesfrom hedging activities are matched with theunderlying cash flows and profits beinghedged. Those relating to trading cash flowsare reported as part of profit and thoserelating to Reuters capital expenditureprogramme are adjusted against the cost ofthe assets to which they relate.Reuters uses financial instruments to hedge aportion of its interest exposure. Profits andlosses on financial instruments are reportedas part of profit for the period to which theyrelate.Financial instruments hedging the risk onforeign currency assets are revalued at thebalance sheet date and the resulting gain orloss offset against that arising from thetranslation of the underlying asset intosterling.RevenueRevenue represents the turnover, net ofdiscounts, derived from services provided tosubscribers and sales of equipment applicableto the year. Short-term contracts areaccounted for on a completed contract basis.Instinet transactionsSecurities transactions between Instinetcounterparties which pass through Instinet inits role as an agency broker are recorded on asettlement date basis and, therefore, are onlyreflected in the balance sheet if there is afailure to settle. Revenues and relatedexpenses arising from such securitiestransactions are accrued from the date of thetransaction.DevelopmentDevelopment expenditure is charged againstprofit in the year in which it is incurred.Pensions and similar obligationsThe expected cost of pensions and other postretirementbenefits is charged against profitso as to spread the cost over the service livesof the employees affected.Restricted share and Instinet long-termincentive plansCosts of the restricted share and Instinetlong-term incentive plans are charged toprofit over the vesting period of the awards.Tangible fixed assetsDepreciation is calculated on a straight linebasis so as to write down the assets to theirresidual values over their expected usefullives:Freehold land..........................Not depreciatedFreehold buildings .............Normally 50 yearsLeasehold property ...............Over the term ofthe leaseComputer systems equipment,office equipment andmotor vehicles...............................3 to 5 yearsStocksStocks and contract work in progress arevalued at the lower of cost and net realisablevalue less progress payments received andreceivable from clients. Progress payments inexcess of the value of work carried out areincluded within creditors.Cost is calculated on a first in first out basisby reference to the invoiced value of suppliesand attributable costs of bringing stocks totheir present location and condition.Net realisable value is the estimated marketvalue less selling costs.Short-term investmentsGovernment securities are stated in thebalance sheet at the lower of cost plusaccrued capital appreciation and marketvalue. Income from these securities and anyadjustment for changes in their market valueduring the year are reported as part of profit.Interest on certificates of deposit is calculatedat the yield at which the certificate waspurchased and is reported as part of profitover the life of the certificate. Certificates ofdeposit are stated in the balance sheet at thelower of cost plus accrued interest and marketvalue.Movements in short-term investments arereported under the heading of management ofliquid resources in the cash flow statement.Reuters Group PLC Annual Report 1999 73