IFRS Application APRIL 22, International Financial Reporting Standards Application (IAS/IFRS)

Transcription

1 International Financial Reporting Standards Application (IAS/IFRS)

2 INDEX I. Introduction II. III. Financial Reporting Alternatives Adopted First IFRS/IAS Application A. Total Shareholders Equity Impact B. Main Adjustments C. Main Reclassifications D. Opening Balance Sheet IV. Financial Statements (December 31, 2004) A. Profit and Loss Account B. Balance Sheet C. Financial Ratios Appendix 2004 Quarterly Financials

3 I. INTRODUCTION

4 Scope The information in this presentation has been prepared according to the International Financial Reporting Standards (IFRS), the Permanent Interpretation Committee (SIC) and the International Financial Reporting Interpretations Committee (IFRIC), published by the International Accounting Standards Board (IASB) taking effect in December 31, The information hereby has not been audited. Some projects, settlements and interpretations are currently under revision by IASB, IFRIC and/or the Spanish Securities Exchange Commission (CNMV- Comisión Nacional del Mercado de Valores ). Thefore, the information is: Preliminar. The information has been prepared according to the rules and principles know as of today and under the assumption that current IFRS will not change for the financial reporting of year Therefore, the information presented is not an accurate and complete conciliation under IFRS. Non Audited. The financial information presented is an approximation and it is subject to future changes. In Consolidated Basis. The information refers only to Grupo Prisa consolidated accounts.

5 Legal Frame in the Application Process The European Union (Rule CE nº 1.606/2002) obliges all public companies to report the consolidated financial statements according to the International Financial Reporting Standards, starting in January 1, TRANSITION SCHEDULE Transition Date: First comparative period under NIC 1/01/04 (transition date) Number of periods: IFRS 1 requires the reporting of the previous year Reporting date: Closing date of the first year to be presented under IFRS 31/12/04 (Comparison) 31/12/05 (Reporting date)

6 Grupo Prisa IFRS Adaptation Process Adaptation process started in October External collaborators specialized in the matter since the beginning of the process The External Auditors have made a limited scope review of the pro-forma financial information prepared under IFRS. Therefore, the information presented is not fully audited according to the generally accepted auditing rules Group 2005 Internal Information is prepared according to IFRS rules

7 Key Highlights Initial Shareholders equity decreasing by 4.9% mainly due to reclassifications 2004 Net Profit improves in 19.3 million, essentially due to the elimination of goodwill amortization In principle, IFRS application does not affect the main business drivers. Therefore it should not have any impact in: The Group Business Strategy Market Value Financial Strength There is no impact in the future Income Tax Expense. Taxes are paid according to the individual accounting principles (local GAAP). IFRS does not apply

8 II. FINANCIAL REPORTING ALTERNATIVES ADOPTED

9 Initial Decisions IFRS allows certain alternatives when applying certain rules Grupo Prisa has taken the following decisions Financial Reporting by Segments IAS 14 PRINCIPAL: SECONDARY: BY BUSINESS UNIT BY GEOGRAPHIC SEGMENT Financial Accounts Presentation IAS 1 Grupo Prisa decides: - To present the PROFIT & LOSS ACCOUNT BY NATURE - To prepare the CASH FLOW STATEMENT by the INDIRECT METHOD

10 Initial Decisions (cont d) Business Combinations IFRS 3 Grupo Prisa decides not to apply IFRS 3 retrospectively the business combinations that took place before the transition date (January 1, 2004) Fixed Assets IAS 16,40,38 & IFRS 5 Grupo Prisa decides to account the cost value minus deterioration losses Fair Value or Revaluation as Deemed Cost IFRS & 19 Grupo Prisa decides as a first time adopter to use previous legal revaluation of an item of property, plant & equipment at, or before, the date of transition to IFRS as deemed cost at the date of the revaluation, if the revaluation was, at the date of the revaluation, broadly comparable to depreciated cost under IFRS, adjusted to reflect changes in a general or specific price index. Previous carry-on amounts remain unchanged in the transition to IFRS. Translation Differences IFRS 1 Grupo Prisa decides not to apply IAS 21 to the translation differences at the transition date. The cumulative translation differences are considered at no value in the IFRS opening Balance Sheet Stock based payments IFRS 2 Grupo Prisa decides not to apply IFRS 2 to the stock option plans that took place before November 7, 2002

11 III. FIRST IFRS/IAS APPLICATION A. TOTAL SHAREHOLDERS EQUITY IMPACT B. MAIN ADJUSTMENTS C. MAIN RECLASSIFICATIONS D. OPENING BALANCE SHEET

12 First IFRS/IAS Application A. Total Shareholders Equity Impact 32.2 NPV Accounts Receivables (0.9) Convertible bond 9.5 Start up expenses (9.4) Advertising Expenses (2.2) Research Expenses (2.1) Exchange differences gains 2.3 Treasury Stock (29.4) Non capitalized expenses (13,7) Shareholders Equity Previous GAAP Shareholders Equity IFRS * Adjustments after taxes

13 First IFRS/IAS Application B. Main Adjustments IFRS 38: Non capitalized expenses IFRS establishes some requirements to allow the capitalization of certain expenses. It does not allow the capitalization of those expenses that do not meet the criteria for recognition. Impact in Shareholders Equity Start-up expenses (9.4) Research costs, brand development costs and web page related costs that do not directly contribute to generating revenues (2.1) Advertising and promotions related expenses that aim to the launch of a new product (2.2) TOTAL NON CAPITALIZED EXPENSES (13.7)

14 First IFRS/IAS Application B. Main Adjustments IAS 21: Exchange differences gains Spanish accounting principles apply and asymmetrical treatment to foreign exchange gains/losses. In general basis, it does not allow to recognize foreign exchange gains until they arise. IFRS allows the recognition before they arise. Impact in Shareholders Equity Exchange differences gains 2.3

15 First IFRS/IAS Application B. Main Adjustments IAS 32 & 39 Convertible bond breakdown between liabilities and equity according to IAS 32 & 39 Reserves 9.5

16 First IFRS/IAS Application B. Main Adjustments IAS 39 IAS 39 obliges to register the difference between Net Present Value and book value for the long term financial accounts Reserves (0.9)

17 First IFRS/IAS Application C. Main reclassifications IFRS 1, IAS 12, IAS 28 & IAS 32 The main reclassifications due to IFRS application are the following: 1. Reclassification in investments in associates Long term investments (114.1) Goodwill (143.9) Investments in associates Reclassification in deferred tax assets, tax credits and tax impact in IFRS adjustments Long term Investments (54.5) Accounts receivable (10.5) Tax impact in IFRS adjustments (5.8) Deferred tax assets 70.8

18 First IFRS/IAS Application C. Main reclassifications IFRS 1, IAS 12, IAS 28 & IAS 32 The main reclassifications due to IFRS application are the following: 3. Reclassification in deferred tax liabilities and tax impact in IFRS adjustments Other long term liabilities (9.4) Current liabilities (21.3) Tax impact in IFRS adjustments (6.5) Deferred tax liabilities Reclassification in translation differences Cumulative translation differences 47.1 First-time IFRS application reserves (47.1)

19 First IFRS/IAS Application C. Main reclassifications IFRS 1, IAS 12, IAS 28 & IAS 32 The main reclassifications due to IFRS application are the following: 5. Reclassification of treasury stock Treasury Stock (Assets) (29,4) Treasury Stock (Shareholders equity) (29,4)

20 First IFRS/IAS Application D. Opening Balance Sheet Previous GAAP Adjustments IFRS Fixed Assets Intangibles (39.4) 86.7 Property, Plant and Equipment (11.8) Long term financial investments (172.3) Investments in associates Other long term assets Treasury stock 29.4 (29.4) Deferred tax assets Goodwill (143.9) ,045.3 (37.1) 1,008.2 Current Assets Inventory 91.1 (0.4) 90.7 Accounts Receivable (13.1) Cash and cash equivalents 49.5 (0.1) (13.6) Total Assets 1,626.7 (50.7) 1,576.0

21 First IFRS/IAS Application D. Opening Balance Sheet Previous GAAP Adjustments IFRS Shareholders Equity Issued capital Reserves Cumulative Transation Differences (47.1) 47.1 First-time Reserves (49.9) (49.9) Due to reclassification (47.1) (47.1) Due to adjustments (2.8) (2.8) Treasury Stock (29.4) (29.4) Retained earnings Group Shareholders Equity (32.2) Minority Inerest 28.0 (1.1) 26.9 Total Shareholders Equity (33.3) Long Term Liabilities Long term financial debt (2.4) Deferred tax liabilities Other long term liabilities (31.0) Current Liabilities Short term financial debt (0.1) Accounts payable and other short term liabilities (21.1) (21.2) Total Shareholders Equity and Liabilities 1,626.7 (50.7) 1,576.0

22 III. FINANCIAL STATEMENTS (DECEMBER 31, 2004) A. PROFIT AND LOSS ACCOUNT B. BALANCE SHEET C. FINANCIAL RATIOS

23 A Profit and Loss Account Change in Operating Profit 19.1 Intermediary related expenses 98.4 Intermediary related revenues (98.4) Extraordinary Result (16.7) Other (2.4) Previous GAAP IFRS 171

24 A Profit and Loss Account Change in Operating Profit IAS 18: Extraordinary Result IFRS does not allow to report any items of income and expense as extraordinary items. Every income or expense will be classified according to its nature. Extraordinary Result (16.7)

25 A Profit and Loss Account Change in Operating Profit IAS 18: Revenue Recognition IFRS establishes that sales on behalf of third parties should not be recognized in the profit and loss account. These transactions should generate accounts in the balance sheet. The only revenue recognition will be the commission. These type of transactions are derived in businesses such as Distribution and Advertising. Advertising 58.0 Distribution

26 A Profit and Loss Account Change in Net Profit Goodwill Amortization 22.1 Financial result (2.3) Other 2.8 Non capitalized expenses (3.3) 19.3 Net Profit Previous GAAP Net Profit IFRS 122.5

27 A Profit and Loss Account Change in Net Profit IFRS 3, IAS 36: Elimination of Goodwill Amortization Goodwill is accounted for its cost minus any cumulated impairment losses. Goodwill is no longer amortized, but it is subject to an impairment test in an annual basis. Non goodwill amortization effect 22.1

28 A Profit and Loss Account Change in Net Profit IAS 32 & 39 and IAS 21 IFRS allows the recognition of foreign exchange gains before they arise. Higher interest expense due to the difference between the fair value and the current value of the financial liabilities (exchangeable bond). IFRS does not allow the accrued amortization of the initial expenses related to the issue of the exchangeable bond. Exchange differences gains 0.4 Financial expense increase due to the fair value accounting (3.3) Reversion of accrued amortization 0.6 (2.3)

29 A Profit and Loss Account Change in Net Profit IFRS 3: Business Combinations IFRS 3 does not allow the capitalization of certain expenses as part of the goodwill. Non capitalized expenses (3.3)

30 A Profit and Loss Account December 31, 2004 December Previous GAAP Adjustments IFRS Operating Revenues 1, ,355.4 Operating Expenses 1, ,097.9 EBITDA Depreciation and Provision OPERATING PROFIT (EBIT) Financial result -11, Extraordinary result -16, Goodwill amortization Income from associates PROFIT BEFORE TAXES Income tax expense Minority interest NET PROFIT Basic earnings per share (euro) Diluted earnings per share (euro)

31 B. Balance Sheet December 31, 2004 Assets Previous GAAP Adjustments IFRS Fixed Assets Intangible assets (25.9) 78.1 Property, plant and equipment Long term financial investments (165.7) 96.6 Investment in associates Other long term assets Treasury stock 29.7 (29.7) Deferred taxe assets Goodwill (239.8) , ,110.4 Current Assets Inventory 99.8 (0.1) 99.7 Accounts receivable (12.6) Cash and cash equivalents (12.7) Total Assets 1, ,695.8

32 B. Balance Sheet December 31, 2004 Liabilities Shareholders Equity Previous GAAP Adjustments IFRS Issued capital Reserves Cumulative Translation Differences (47.0) First Reserves (49.9) (49.9) Treasuty Stock (29.7) (29.7) Retained earnings Group Shareholders Equity Minority interest 16.7 (1.0) 15.7 Total Shareholders Equity (13.6) Long Term Liabilities Long term financial debt (0.8) Deferred taxes Other long term liabilities (47.9) (8.6) Current liabilities Short term financial debt (0.1) Accounts payable and other short term liabilites (5.6) (5.7) Total Shareholders Equity & Liabilities 1, ,695.8

33 C. Financial Ratios as of December 31, 2004 Previous GAAP IFRS EBITDA margin (%) EBIT margin (%) Net Profit margin (%) Net Debt/Shareholders Equity (%) Net Debt to EBITDA (%)

34 APPENDIX 2004 QUARTERLY FINANCIALS

35 Profit and Loss Account March 31, 2004 March Previous GAAP Adjustments IFRS Operating Revenues (23.2) Operating Expenses (16.2) EBITDA 60.3 (7.0) 53.3 Amortization and Depreciation 21.0 (0.7) 20.3 EBIT 39.3 (6.3) 33.0 Net financial result (1.9) (1.6) (3.5) Extraordinary result (7.8) 7.8 Goodwill amortization (4.8) 4.8 Inome from associates (8.6) 0.2 (8.4) Profit before taxes Income tax (5.4) 0.0 (5.4) Minority interest (1.0) 0.0 (1.0) Net Profit Basic earning per share (euro) Diluted earnings per share (euro)

36 Profit and Loss Account June 30, 2004 June Previous GAAP Adjustments IFRS Operating Revenues (45.7) Operating Expenses (33.8) EBTDA (11.9) Amortization and Provision 41.6 (0.6) 41.0 EBIT (11.3) 89.3 Net financial result (4.7) (2.2) (6.9) Extraordinary result (13.3) 13.3 Goodwill amortization (9.8) 9.8 Income from associates (13.3) 0.1 (13.2) Profit before tax Income tax (14.3) 0.6 (13.7) Minority interest 0.0 Net Profit Basic earnings per share (euro) Diluted earnings per share (euro)

37 Profit and Loss Account September 30, 2004 September Previous GAAP Adjustments IFRS Operating Revenues 1,092.3 (67.9) 1,024.4 Operating Expenses (45.6) EBITDA (22.3) Amortization and Provisions 74.8 (0.4) 74.4 EBIT (21.9) Net financial result (6.1) (2.5) (8.6) Extraordinary result (21.3) 21.3 Goodwill amortization (15.7) 15.7 Income from associates (16.8) 0.2 (16.6) Profit before taxes Income tax (23.1) 1.1 (22.0) Minority interest (0.3) Net Profit Basic earnings per share (euro) Diluted earnings per share (euro)