REUTERS GROUP PLC ANNUAL REPORT AND ACCOUNTS 1999

Notes on summary of differences between UK and US GAAP37. Adjustments to net income1999 1998 1997£M £M £MProfit attributable to ordinary shareholders in accordance with UK GAAP 425 384 390US GAAP adjustments:Software revenue recognition 2 (2) –Acquisition accounting adjustments (2) (3) (3)Software development costs (2) (2) (2)Employee costs (see note (i) below) (8) (1) (3)Deferred taxes 36 16 4Net income in accordance with US GAAP 451 392 3861999 1998 1997PENCE PENCE PENCEEarnings and dividends (see note (ii) below)Basic earnings per ADS in accordance with US GAAP 192.1 166.6 164.5Diluted earnings per ADS in accordance with US GAAP 189.5 166.0 163.4Dividend paid per ADS (including UK advance corporation tax credit) 97.7 99.8 104.7Deemed special dividend paid per ADS – 627.7 –Total dividend paid per ADS 97.7 727.5 104.7Weighted average number of shares used in basic EPS calculation (millions) 1,409 1,411 1,407Issuable on conversion of options 20 5 10Used in diluted EPS calculation 1,429 1,416 1,417(i) Employee costsThe company has complied with Financial Accounting Standard No. 123, ‘Accounting for Stock-Based Compensation’ (FAS 123). Reuters has continued to applythe methodologies set out in APB Opinion 25, ‘Accounting for Stock Issued to Employees’ and other US GAAP literature in calculating its US GAAP adjustmentsfor share option plans and awards of share rights. Had Reuters elected to recognise compensation expense based upon the fair value at grant date for awards madein 1995 to 1999 under these plans consistent with the alternative methodology set out in FAS 123, net income in 1999 in accordance with US GAAP would havebeen £8 million lower and earnings per ADS and diluted earnings per ADS would both have been 3.6p lower than these figures shown above. Differences arising inprior years were not material.(ii) Capital reorganisationAs explained in note 26, Reuters Holdings PLC completed a capital reorganisation in 1998. Under US GAAP this transaction was deemed a share consolidationcombined with a special dividend and, accordingly, earnings per share and per ADS and dividends per share and per ADS were retroactively restated. Under UKGAAP no restatement of earnings per share was deemed necessary as the cash payment was considered to be equivalent to a repurchase of shares at market valueand the number of new shares in Reuters Group PLC was set to facilitate comparability of earnings with those of Reuters Holdings PLC.(iii) Derivative instruments and hedging activitiesStatement of Financial Accounting Standard No. 133 ‘Accounting for Derivative Instruments and Hedging Activities’ (FAS 133), as amended by FAS 137, becomeseffective for accounting periods beginning on 1 January 2001. FAS 133, which will require all derivatives to be carried on the balance sheet at fair value, introducescomplex rules in respect of hedge accounting and the recognition of movements in fair value through the income statement. FAS 133 is currently being evaluatedand the impact that it will have on Reuters financial statements is not yet known.76 Reuters Group PLC Annual Report 1999