IFRS CONVERGENCE IMPACT ON THE CONSOLIDATED FINANCIAL STATEMENTS. Monday May 1 st 2017

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Aubrie Baker
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1 IFRS CONVERGENCE IMPACT ON THE CONSOLIDATED FINANCIAL STATEMENTS Monday May 1 st 2017

2 CONVERGENCE TO IFRS IFRS impacts the way we view our business Adoption of IFRS streamlines SABIC s worldwide financial reporting and enhances its consistency and transparency SABIC Group s non-listed subsidiaries have early adopted IFRS by one year this promotes further harmony and efficiency in SABIC Group s accounting and reporting function IFRS provides a fresh perspective on certain of our operational matters enabling us to gain more efficiencies IFRS has impacted recognition, measurement and disclosure of key items like property, plant and equipment, intangible assets and employee benefit liabilities although overall impact on net assets has not been significant for SABIC Group Applying IFRS will not change our: Business strategy, model and core operations Stringent risk management approach; and Cash flows and dividend policy IFRS in Saudi Arabia will generally: Streamline the presentation of financial statements of Saudi companies with increased comparability not only among Saudi companies, but also with global markets Provide greater transparency on business performances Support the Kingdom s 2030 vision towards further maturity of Saudi capital market and its attractiveness to investors both local and international No. 1

3 IFRS IMPACT ACROSS SABIC S KEY PERFORMANCE INDICATORS AND RATIOS AS PER 31 DECEMBER 2016 Area IFRS Difference Difference (%) Revenue 132, ,083 10, % Rationale Revenues are now recorded at gross value, instead of net of marketing and distribution expenses Expenses, financial charges and tax (107,738) (118,937) (11,199) 10.4% Includes re-classification of marketing and distribution expenses Impairment of certain plant based on a discounted future cash flow approach as per IFRS (vs. a gross future cash flow approach as per ) Recognition of deferred taxes in certain Saudi Arabian subsidiaries with foreign joint venture partner Net profit 17,839 17,615 (224) -1.3% Shareholders equity 163, ,535 (5,513) -3.4% Total assets 316, ,855 (3,037) -1.0% Net impact of additional expenses (e.g., impairment) net of share of non-controlling interests ( NCI ) Adjustment of certain goodwill related differences with certain foreign subsidiaries Valuation of certain employee benefits based on actuarial calculations (the above are net of share of NCI) Reduction in total assets mainly due to goodwill value reduction and certain other re-classifications Net income margin 13.4% 12.3% -1.1% Return on assets 5.6% 5.6% -0.02% Return on equity 10.9% 11.2% 0.2% No. 2

4 IFRS IMPACT ON NET PROFIT FOR THE YEAR ENDED , % -2.2% -1.3% -0.2% 4.8% 17,615 Impairment Accounting Impairment of a certain plant based on a discounted future cash flow approach as per IFRS (vs. a gross future cash flow approach as per ) Actuarial valuation Under IFRS, end of service benefits ( EOSB ), is calculated using actuarial assumptions for post-employment medical benefits, continuous service awards and other such benefits NCI This represents share of Non controlling interest (NCI) in all IFRS adjustments Net profit under (SAR mln) Impairment of PPE Actuarial valuation of employee benefits Others, net NCI Net profit under IFRS (SAR mln) No. 3

IFRS IMPACT ON SHAREHOLDERS EQUITY AS OF 31 ST DEC 2016 163,048-3.4% Actuarial valuation Goodwill -1.8% -1.9% -0.2% 0.3% 0.

5 IFRS IMPACT ON SHAREHOLDERS EQUITY AS OF 31 ST DEC , % Actuarial valuation Goodwill -1.8% -1.9% -0.2% 0.3% 0.2% 157,535 Under IFRS, end of service benefits ( EOSB ), is calculated using actuarial assumptions for post-employment medical benefits, continuous service awards and other such benefits Adjustment of certain goodwill related differences with certain foreign subsidiaries Impairment Accounting Componentization Impairment of a certain plant based on a discounted future cash flow approach as per IFRS (vs. a gross future cash flow approach as per ) Change in book value of PP&E due to componentization as a result of new components having a different overall average useful life Equity under (SAR mln) Actuarial valuation of employee benefits Reduction in value of goodwill Impairment of PP&E Componentisation Others Equity under IFRS (SAR mln) No. 4

IFRS Consultancy Services. IFRS convergence for unlisted companies in KSA

IFRS Consultancy Services. IFRS convergence for unlisted companies in KSA IFRS Consultancy Services IFRS convergence for unlisted companies in KSA contents 01 IFRS- Road map 02 Key differences between SOCPA and IFRS in certain critical areas 03 Convergence process 04 Our Approach