BOC Report and accounts 2005 - Alle jaarverslagen

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136 The BOC Group plc Annual report and accounts 2005 Notes to the financial statements 30. US accounting information continued Set out below, for illustrative purposes, is a summary consolidated statement of cash flows under SFAS95. 2005 2004 2003 £ million £ million £ million Net cash provided by operating activities 577.7 673.5 562.4 Net cash used by investing activities (235.2) (45.2) (389.2) Net cash used by financing activities (405.7) (413.0) (292.7) Net (decrease)/increase in cash and cash equivalents (63.2) 215.3 (119.5) Cash and cash equivalents at 1 October 289.7 76.4 181.9 Exchange and other movements (1.4) (2.0) 14.0 Cash and cash equivalents at 30 September 225.1 289.7 76.4 h) Stock-based compensation For US reporting purposes the company applies APB Opinion 25,Accounting for Stock Issued to Employees and related interpretations, in accounting for its share option plans. Prior to 2005, by applying this statement, the employee share schemes were deemed non-compensatory since share options were granted at a discount of ten per cent to market price.Accordingly, grants under these schemes did not result in an expense under US GAAP. In 2005, share options under the company’s employee share schemes were granted at a discount of 20 per cent to the market price.Accordingly, they are deemed compensatory, which has resulted in a charge of £0.2 million (£0.1 million net of related tax) in 2005 (2004: £nil, 2003: £nil). Grants of executive share options are made at the market price of the company’s shares at the time of grant and are therefore deemed non-compensatory. The Long-Term Incentive Plan schemes are deemed compensatory and a charge is recognised when certain performance conditions are met. This has resulted in a charge of £6.1 million (£4.3 million net of related tax) in 2005 (2004: £nil, 2003: £nil). If compensation cost for the Group’s share option plans had been determined based on the fair value at the grant dates for awards under those plans consistent with the method of SFAS123,Accounting for Stock-Based Compensation, the Group’s net income under US GAAP would have been: 2005 2004 2003 £ million £ million £ million Reported net income 326.7 297.7 264.3 Add stock compensation expense recognised in accordance with APB25 (net of related tax) 4.4 – – Deduct stock compensation expense determined in accordance with SFAS123 (net of related tax) (9.7) (5.7) (7.1) Pro forma net income 321.4 292.0 257.2 2005 2004 2003 pence pence pence Earnings per share: Basic – as reported 66.0 60.4 53.7 Basic – pro forma 64.9 59.2 52.2 Diluted – as reported 65.8 60.3 53.6 Diluted – pro forma 64.7 59.1 52.2 The Black-Scholes model was used to measure the compensation expense under SFAS123.The assumptions used for grants in 2005 included a dividend yield of 4.5 per cent (2004: 4.5 per cent, 2003: 4.5 per cent), expected share price volatility of 27.2 per cent (2004: 29.5 per cent, 2003: 30.6 per cent), a weighted average expected life of 4.9 years (2004: 4.9 years, 2003: 5.0 years) and a weighted average interest rate of 4.6 per cent (2004: 4.8 per cent, 2003: 4.0 per cent).The weighted average interest rate is based on UK Gilts on the date of grant with a maturity similar to the related options. i) Goodwill For US reporting purposes the company applies SFAS142 in accounting for goodwill.The changes in the carrying value of goodwill for the year ended 30 September 2005 are as follows: Industrial Process and Special BOC Afrox Gas Solutions Products Edwards hospitals Gist Corporate Total £ million £ million £ million £ million £ million £ million £ million Balance at 1 October 55.8 79.1 109.0 15.0 0.7 2.5 262.1 Acquired during year 1.0 2.6 – 0.5 5.1 – 9.2 Disposals during year (0.6) (15.7) – (14.5) – – (30.8) Impairments in year – – (31.1) – – – (31.1) Exchange adjustment 3.6 5.2 (0.2) (1.0) 0.3 – 7.9 Balance at 30 September 59.8 71.2 77.7 – 6.1 2.5 217.3 Under US GAAP the fair values of the business for impairment testing purposes have been calculated using a discounted cash flow method. See note 2 b) for further information. j) Operating leases – lessors The following table provides information required in respect of owned assets which qualify as operating leases under SFAS13. At 30 September 2005 Gross book value 138.7 Accumulated depreciation (81.1) Net book value 57.6 £ million
Notes to the financial statements 137 30. US accounting information continued Revenue recognised in 2005 31.2 Contractually receivable amounts: Year to 30 September 2006 32.5 Year to 30 September 2007 33.7 Year to 30 September 2008 30.8 Year to 30 September 2009 28.5 Year to 30 September 2010 27.3 Thereafter 4.1 Minimum future rentals 156.9 1. Contractually receivable amounts include amounts in respect of maintenance, safety and other operational costs. k) Recently issued accounting pronouncements implemented in the year EITF04–1 – Accounting for Pre-existing relationships between the Parties to a Business Combination In October 2004, the Emerging Issues Task Force (EITF) reached a consensus on EITF issue 04–1. Issue 04–1 applies when two parties that have a pre-existing contractual relationship enter into a business combination. If it is determined that assets of an acquired entity are related to a pre-existing contractual relationship, thus requiring accounting separate from the business combination, management will evaluate whether the acquiring entity of the Group should recognise contractual relationships as assets separate from goodwill in that business combination. EITF 04–1 did not have a material impact on the Group’s results and financial position in the year. l) Recently issued accounting pronouncements not yet implemented SFAS151 – Inventory costs SFAS151 was issued in November 2004 and is effective for all inventory costs incurred during fiscal years beginning after 15 June 2005.This statement amends ARB 43 and requires all idle facility expense, excessive spoilage, double freight and re-handling costs to be recognised as current-period charges regardless of whether they meet the criterion of “so abnormal” (as previously stated in ARB 43). In addition, ARB 43 requires that the allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. Unallocated overheads are recognised as an expense in the period in which they are incurred. Management does not believe that this statement will have a material effect on the Group’s results and financial position under US GAAP in future periods. SFAS153 – Exchanges of non-monetary assets SFAS153 was issued in December 2004 and is effective for all non-monetary asset exchanges occurring in fiscal periods beginning after15 June 2005. This statement amends APB Opinion 29, which is based on the principle that exchanges of non-monetary assets should be measured based on the fair value of the assets exchanged. SFAS153 provides a general exception for exchange transactions that do not have commercial substance – that is, transactions that are not expected to result in significant changes in the cash flows of the reporting entity. Management does not believe that this statement will have a material effect on the Group’s results and financial position under US GAAP in future periods. SFAS123(R) – Share-based payment (revised 2004) SFAS123(R) was issued in December 2004 and is effective for the first annual reporting period that starts after 15 June 2005. It supersedes APB Opinion 25,Accounting for Stock Issued to Employees. SFAS123(R) is concerned with how to account for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.The main effect of this revised standard is a move from an intrinsic value method to a fair value based method. It will therefore result in an additional charge relating to the fair value of share options in the Group’s income statement. Management does not believe that this will have a material effect on the Group’s results and financial position under US GAAP in future periods. SFAS154 – Accounting changes and error corrections – a replacement of APB Opinion No. 20 and FASB Statement No. 3. SFAS154 was issued in May 2005 and is effective for fiscal years beginning after 15 December 2005.This statement replaces APB Opinion 20,Accounting Changes, and SFAS 3, Reporting Accounting Changes in Interim Financial Statements.This Statement requires voluntary changes in accounting principles to be reported via retrospective application, unless impracticable. Previous guidance given in APB Opinion 20 for reporting the correction of an error in previously issued financial statements or a change in accounting estimates is unchanged in SFAS154. Management does not believe that this statement will have a material effect on the Group’s results and financial position under US GAAP in future periods. FIN47 – Accounting for conditional asset retirement obligations FIN47 was issued in August 2005 and is effective for fiscal years ending after 15 December 2005.This interpretation clarifies the term ‘conditional asset retirement obligation’ as used in SFAS143,Accounting for asset retirement obligations. FIN47 requires an entity to recognise a liability for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated.The fair value of a liability for the conditional asset retirement obligation should be recognised when incurred - generally upon acquisition, construction, or development and/or through the normal operation of the asset. Uncertainty about the timing and/or method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when sufficient information exists. Management does not believe that this interpretation will have a material effect on the Group’s results and financial position under US GAAP in future periods. m) Other information Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.Actual results could differ from those estimates. £ million
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BOC Report and accounts 2005
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01 The BOC Group plc is a public li
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Financial highlights 03 Dividends p
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Chairman’s statement 05 Conduct a
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Chief executive’s review 07 Indus
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Board of directors 09 08 09 10 11 1
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Executive management board 11 09 10
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Group five year record 13 Capital e
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Group profile 15 Analysis of result
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Group profile 17 Principal industri
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Group profile 19 In China, signific
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Group profile 21 Sales opportunitie
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Employees 23 At 30 September 2005 t
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Employees 25 Retirement benefit pla
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Research, development and informati
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Risk factors 39 BOC relies on devel
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Operating review 41 Exceptional ite
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Operating review (comparing 2005 wi
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Financial review 55 Net debt/equity
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Financial review 57 The balance she
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Financial review 59 Manganese litig
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Financial review 61 Current asset p
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Financial review 63 Average exchang
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Corporate governance 65 During the
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Corporate governance 67 Performance
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Corporate governance 69 During the
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Corporate governance 71 There is a
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Report on remuneration 73 Variable
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Report on remuneration 75 Current m
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Report on remuneration 77 Individua
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Report on remuneration 79 Executive
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Report on remuneration 81 Opening m
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Report on remuneration 83 Mr Médor
Page 87 and 88: Report by the independent auditors
Page 89 and 90: Group balance sheet At 30 September
Page 91 and 92: Total recognised gains and losses Y
Page 93 and 94: Accounting policies 91 General •
Page 95 and 96: Notes to the financial statements 9
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Page 147 and 148: Shareholder information 145 Payment
Page 149 and 150: Glossary of terms 147 Terms used in
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