BOC Report and accounts 2005 - Alle jaarverslagen

62 The BOC Group plc Annual report and accounts 2005 Financial review
e) Foreign exchange.There are certain differences in the requirements of IAS 21 compared to UK GAAP in
respect of functional currencies and in relation to the accounting for foreign exchange on loans between
Group companies.This is an area where there may be increased volatility in the Group’s ongoing results on an
IFRS basis compared to UK GAAP arising from exchange gains and losses.
f) Financial instruments.The Group will adopt IAS 39 on 1 October 2005 in line with the exemption under IFRS 1.
This standard impacts the accounting for a range of financial instruments and embedded derivatives.The
Group has few financial instruments and they are predominantly related to managing currency and interest
rate risk.The Group has reviewed its financial instruments and has concluded that at present they meet the
requirements to enable it to apply hedge accounting. Embedded derivatives typically arise from escalation
clauses in contracts with customers to recover cost increases.Whilst the impact is not material at 1 October
2005,embedded derivatives may give rise to greater volatility in the Group’s earnings arising from marking to
market the underlying derivative.
The adoption of IFRS will also result in a number of changes to the presentation of the financial statements
including disclosures. For example, the Group’s share of the post-tax profit arising in joint ventures and associates
will be shown as one line in the income statement rather than as part of Group turnover, operating profit and
interest.There will be a number of other presentational changes including reclassifications within the balance sheet
and a change to the layout of the cash flow statement.
Overall, management believes that the impact of IFRS on earnings and net assets will be broadly neutral
subject to the effects of IAS 21 and IAS 39 as noted above. Cashflows and the underlying economics of the
business will not change.
US GAAP
The financial statements of the Group have been prepared in accordance with UK GAAP, which differs in certain
respects from US GAAP.
The US accounting information in note 30 to the financial statements gives a summary of the principal
differences between the amounts determined in accordance with the Group’s accounting policies (based on UK
GAAP) and amounts determined in accordance with US GAAP, together with the reconciliation of net profit
and shareholders’ funds from a UK GAAP basis to a US GAAP basis and a movement in shareholders’ funds
on a US GAAP basis.
The net income for the year ended 30 September 2005 under US GAAP was £326.7 million (2004:
£297.7 million, 2003: £264.3 million), compared with the net profit of £367.0 million in 2005 (2004: £264.0 million,
2003: £219.1 million) under UK GAAP. Shareholders’ funds at 30 September 2005 under US GAAP were
£2,122.2 million (2004: £1,920.1 million), compared with £1,942.0 million (2004: £1,675.3 million) under UK GAAP.
The difference primarily results from the differing accounting treatment of pensions, goodwill, financial instruments,
investments, fixed asset revaluations, deferred tax and variable interest entities.
Related party transactions
During the year, interest income of £13.8 million (2004: £7.3 million, 2003: £7.6 million) was received from the
Cantarell joint venture in Mexico.
During the year, the Group was invoiced £45.9 million in respect of purchases of production plants from
Linde BOC Process Plants in the US.At 30 September 2005, £1.9 million was payable in respect of these invoices.
No material purchases were made in 2004 or 2003.
The Group had no other material related party transactions that might reasonably be expected to
influence decisions made by the users of these accounts.
Exchange rates
The majority of the Group’s operations are located outside the UK and operate in currencies other than sterling.
The effects of fluctuations in the relationship between the various currencies are extremely complex and
variations in any particular direction may not have a consistent impact on the reported results. In terms of average
rates for the year, in 2005 sterling strengthened against two of the four principal currencies affecting the Group:
by three per cent against the US dollar and by two per cent against the Japanese yen. Sterling weakened by
two per cent against the Australian dollar and by three per cent against the South African rand.
In 2004, sterling strengthened against the US dollar and the Japanese yen. Sterling weakened against the
Australian dollar and the South African rand.
In 2003, sterling strengthened against the US dollar and the Japanese yen. Sterling weakened against the
Australian dollar and the South African rand.