IFRS presentation to analysts and investors - About United Utilities

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Major IFRS adjustments representing materialdifferences from UK GAAP• Infrastructure Accounting (IAS 16)• Interests in Joint Ventures (IAS 31)• Defined Benefit Pension Scheme Accounting (IAS 19)• Business Combinations (IAS 38 / IFRS 3)• Deferred Tax (IAS 12)• Dividends (IAS 10)• Accounting for Derivatives (IAS 39)26Turning to business combinations.
Business Combinations (IAS 38 / IFRS 3)• Under IFRS, the recognition test for intangible fixed assets acquired inbusiness combinations is less restrictive than that of UK GAAP– therefore, more intangible assets will be separately identified fromgoodwill• Goodwill is not amortised under IAS 38, but rather subject to annualimpairment reviews– 2004/05 profits and earnings increase by £5m, comprising:• a £7m amortisation reduction; offset by• a £2m reduction in profit on business disposals– there is a minimal impact on net assets, with the reduction in goodwillbroadly offset by the recognition of newly identified intangible assets27The principal adjustments in this area arise from the treatment of intangible fixedassets and goodwill.Under IFRS, the recognition of intangible fixed assets acquired in businesscombinations is less restrictive than that of UK GAAP. In contrast to FRS 10,IAS 38 does not require an intangible to be separable from its owner, if itsownership can be demonstrated through contractual or legal rights. Therefore,more intangible assets will be separately identified from goodwill. Intangibleassets are stated at cost less accumulated depreciation and are amortised overtheir useful lives on a straight line basis.Negative goodwill cannot be recognised on the balance sheet and is credited tothe income statement in the period of acquisition.Positive goodwill is not amortised under IAS 38, but rather subject to annualimpairment reviews. Therefore, although it may be possible to carry goodwillfor longer if the future cashflows are strong, increased volatility will beintroduced to the income statement.Since goodwill is no longer being amortised, the 2004/05 amortisation chargereduces by around £7 million. This is partially offset by a £2 million reduction inprofit relating to business disposals.There is a minimal impact on net assets, with the reduction in goodwill broadlyoffset by the recognition of newly identified intangible assets from businesscombinations.
Page 1 and 2: United Utilities PLCInternational F
Page 3 and 4: Simon BateyGroup Finance DirectorGo
Page 5 and 6: IFRS conversion timetable31/03/04 3
Page 7 and 8: IFRS headlines - effect on 2004/05
Page 9 and 10: Segmental operating profit£mIFRS 1
Page 11 and 12: United Utilities’ basis of prepar
Page 13 and 14: Infrastructure Accounting (IAS 16)
Page 15 and 16: Infrastructure Accounting (IAS 16)I
Page 17 and 18: IFRS impact - net assets at 31 Marc
Page 19 and 20: Interests in Joint Ventures (IAS 31
Page 21 and 22: Interests in Joint Ventures (IAS 31
Page 23 and 24: Defined Benefit Pension Scheme Acco
Page 25: IFRS impact - net assets at 31 Marc
Page 31 and 32: Deferred Tax (IAS 12)• IAS 12 doe
Page 33 and 34: Major IFRS adjustments representing
Page 37 and 38: Accounting for Derivatives (IAS 39)
Page 39 and 40: Accounting for Derivatives (IAS 39)
Page 41 and 42: Operating Profit (£m)IFRS impact -
Page 45 and 46: IFRS impact - 2004/05 earnings per
Page 47 and 48: Retained Earnings• The consolidat
Page 49 and 50: IFRS impact on key ratios and finan
Page 51 and 52: Summary• Overall impact on profit

IFRS presentation to analysts and investors - About United Utilities

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