BOC Report and accounts 2005 - Alle jaarverslagen

132 The BOC Group plc Annual report and accounts 2005 Notes to the financial statements
30. US accounting information
a) Summary of differences between UK and US generally accepted accounting principles and other US accounting information
The financial statements of The BOC Group plc are prepared in accordance with accounting principles generally accepted in the UK (UK GAAP), which
differ in certain significant respects from accounting principles generally accepted in the US (US GAAP).
Set out below is a summary of the more significant adjustments which would be required if US GAAP had been applied, together with reconciliations
of net profit and shareholders’ funds from a UK GAAP to a US GAAP basis.Also presented on a US GAAP basis are a movement in shareholders’ funds,
a consolidated cash flow statement, information on earnings per share, information on stock based compensation and details of recently issued US
accounting pronouncements.
Goodwill and other intangible assets
Under UK GAAP, goodwill arising on acquisitions before 1998 accounted for under the purchase method has been eliminated against shareholders’ funds.
Additionally, UK GAAP requires that on subsequent disposal or closure of a business, any goodwill previously taken directly to shareholders’ funds is then
charged against income.The Group adopted FRS10 in 1999, which requires goodwill on subsequent acquisitions to be capitalised and amortised over a
period not exceeding 20 years.
Under UK GAAP the Group has recognised negative goodwill on certain acquisitions. Under US GAAP, the excess of the amounts assigned to the
assets acquired and liabilities assumed over the acquisition cost is adjusted against the values of the acquired long-lived assets in accordance with SFAS 141.
This does not result in a difference between the shareholders’ funds under UK GAAP and US GAAP, although there is a difference in the classification
between tangible and intangible assets.
Under US GAAP (SFAS142) goodwill continues to be capitalised, although no amortisation is charged to the income statement. Instead, an annual
impairment test is carried out, with any identified impairment loss recorded in the income statement.
Other intangible assets with a finite life continue to be amortised under both UK and US GAAP. UK GAAP is highly prescriptive with regard to the
recognition of intangible assets, although US GAAP rules result in the recognition of a greater amount of intangible assets.Therefore, differences arise in the
classification of some intangible assets and goodwill between UK and US GAAP.Amortisation that has been charged against goodwill under UK GAAP is
added back in the reconciliation to net income on a US GAAP basis.
The average life of other intangible assets is ten years and the annual amortisation charge under US GAAP is expected to be approximately £1 million.
Impairment of goodwill
Under UK GAAP, goodwill impairment reviews are carried out at the end of the first financial year following an acquisition, and also when an indicator of
impairment exists.The impairment is measured by comparing the carrying value of the goodwill with the higher of the net realisable value and the value in use.
Under US GAAP, goodwill impairment reviews are also conducted when an indicator of impairment exists, in addition to an annual goodwill
impairment test, as required by SFAS142.The impairment is measured by comparing the carrying value of a reporting unit to its fair value.Where the
carrying value is greater than the fair value, the impairment loss is based on the excess of the carrying value of goodwill in the reporting unit over the
implied fair value of the goodwill.
Profit or loss on the partial disposal of Group companies
Under UK GAAP (UITF 31), gains on the partial disposal of Group companies involving non-monetary consideration are recorded in the statement of
total recognised gains and losses. Under US GAAP, such gains and losses are recorded in the income statement.
Deferred tax
Under UK GAAP, full provision for deferred tax is recognised in the financial statements. Under US GAAP, deferred tax is recognised on a similar basis.
In addition, however, US GAAP requires provision for deferred tax on the unremitted earnings of overseas businesses that are not deemed to be
permanently reinvested.This is not permitted under UK GAAP except in respect of any dividends that have been accrued as receivable.
Revaluation of fixed assets
UK GAAP allowed for the periodic revaluation of land and buildings with depreciation then being calculated on the revalued amount.Any surplus or deficit
(to the extent that the revaluation reserve was in surplus) on the revaluation was then taken directly to shareholders’ funds.With the Group’s adoption of
FRS15 in 2000, the Group no longer revalues fixed assets. Under US GAAP, revaluations of fixed assets are not permitted and, as a result, the reconciliation
restates fixed assets to historical cost.The depreciation charge and any write downs of previously revalued assets are adjusted accordingly.
Impairment of tangible fixed assets
Under UK GAAP, a tangible fixed asset is reviewed for impairment if an indication exists that the asset may be impaired. If necessary, an impairment loss
is recorded.A value in use calculation is carried out, based on discounted pre-tax future cash flows from the asset (or income generating unit to which the
asset belongs).
Under US GAAP, a preliminary review of the tangible fixed asset is carried out using undiscounted future cash flows. If the undiscounted future cash
flows are less than the asset’s carrying value, an impairment loss is required.The impairment loss will be calculated using discounted future cash flows, or
the asset’s market value.
Under US GAAP, the reversal of previously recognised impairment losses is not permitted.
Provisions
Under UK GAAP, general requirements for liabilities and charges are contained in FRS 12 which states that provisions are made when a present obligation
exists in respect of a past event, where it is probable that a transfer of economic benefits will be required and where the amount of the obligation can be
reliably estimated. Under US GAAP the general requirements for loss contingencies of SFAS 5 require that, a provision is made when it is probable that an
asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated.The UK GAAP policy is substantially the same as
the US GAAP policy and no adjustment is required.
Restructuring costs
Under UK GAAP, when a decision has been taken to restructure, supported by a detailed formal plan and the creation of a valid expectation in those
affected that the restructuring will take place, the necessary provisions are made for impairment of asset values together with severance and other costs.
Under US GAAP (SFAS146), the requirements for charging restructuring costs to income are more prescriptive and all significant actions arising from
the restructuring plan and their completion dates must be identified by the balance sheet date.
Pensions
For UK GAAP reporting (FRS17 – Retirement benefits), the pension asset or liability in the balance sheet represents the difference between the market
value of pension scheme assets at the balance sheet date and the present value of pension scheme liabilities at that date, net of deferred tax.
Under US GAAP (SFAS87), plan assets are valued by reference to market-related value at the date of the financial statements. Liabilities are assessed
using the rate of return obtainable on fixed or inflation-linked bonds.
FRS17 requires that past service costs are recognised in full in the period in which they become vested. SFAS87 requires past service costs to be
amortised over the remaining service lives of the employees to whom the amendments relate.