E-Malt.com News article: UK:Diageo issues issued supplementary schedules in respect of its transition to IFRS financial reporting

At its preliminary results in September 2005 Diageo issued supplementary schedules giving information in respect of its transition to financial reporting in accordance with International Financial Reporting Standards (IFRS), the company announced on November 9. This data included unaudited restated financial information prepared in accordance with IFRS in relation to the year ended 30 June 2005 (the 2005 IFRS Information).

The International Accounting Standards Board, at its meeting in October 2005, considered a technical correction to eliminate an inconsistency in one of the standards. IFRS requires that deferred tax liabilities should be recognised in respect of separable intangibles where there is a difference between the accounting and tax values for these assets. Normally recognition of this deferred tax liability would result in a corresponding increase in goodwill. Diageo reflected this treatment in the 2005 IFRS Information issued on 1 September 2005 in respect of deferred tax liabilities of £438 million relating to intangibles acquired in business combinations prior to the IFRS transition date (1 July 2004).

This was also the treatment considered as a technical correction by the IASB. However, following the decision by the IASB not to propose a technical correction, the provisions of IFRS1 applicable to pre transition date business combinations require that deferred tax liabilities existing at the transition date in respect of these assets should reduce equity by an equivalent amount and not increase goodwill.

Under UK GAAP, net assets at 1 July 2004, 31 December 2004 and 30 June 2005 were £4,183 million, £4,284 million and £3,834 million respectively. Under IFRS, net assets at 1 July 2004, 31 December 2004 and 30 June 2005 were £5,229 million, £4,997 million and £4,626 million respectively after making the above adjustment. This compares to £5,667 million, £5,435 million and £5,074 million, respectively disclosed in the 2005 IFRS information issued on 1 September 2005. This adjustment has no impact on the IFRS income statement or cash flows. Updated IFRS financial information is attached. The IFRS financial information and reconciliations with UK GAAP are available at www.diageo.com.

As described in the 2005 IFRS Information published on 1 September, IFRS are subject to ongoing review and endorsement by the EU and possible amendment by interpretative guidance from the International Accounting Standards Board (IASB) and are therefore still subject to change. Diageo’s IFRS information will be updated as necessary for any such changes, should they occur.

Diageo is required to present its first financial statements in accordance with IFRS in respect of the year ending 30 June 2006. The group will also present its interim financial information for the six months ending 31 December 2005 in accordance with IFRS.

Diageo is the world's leading premium drinks business. With its global vision, and local marketing focus, Diageo brings to consumers an outstanding collection of beverage alcohol brands across the spirits, wine and beer categories including Smirnoff, Guinness, Johnnie Walker, Baileys, J&B, Cuervo, Captain Morgan and Tanqueray, and Beaulieu Vineyard and Sterling Vineyards wines. Diageo trades in some 180 countries around the world and is listed on both the New York Stock Exchange (DEO) and the London Stock Exchange (DGE).



11 November, 2005