These are the Group’s first consolidated financial statements prepared in accordance with IFRS. IFRS has been applied in preparing the financial statements for the year ended 31 December 2005, the comparative information presented in these financial statements for the year ended 31 December 2004 and in the preparation of the opening IFRS balance sheet at 1 January 2004 (the Group’s date of transition).
In preparing its opening IFRS balance sheet, the Group has adjusted amounts reported previously in financial statements prepared in accordance with Dutch GAAP. An explanation of how the transition from Dutch GAAP to IFRS has affected the Group’s financial position, financial performance and cash flows is set out in the following tables and the notes that accompany the tables. 
| |
in millions of Euro |
Dutch GAAP
31 December 2004 |
Reclassifications |
Effects
of adopting IFRS |
IFRS
31 December 2004 |
|
Opening balance IFRS
1 January 2004 |
| |
|
|
|
|
|
|
|
| |
Assets |
|
|
|
|
|
|
| |
Non-current assets |
|
|
|
|
|
|
| |
Property and equipment |
98 |
-30 |
|
68 |
|
86 |
 |
Intangible assets |
548 |
30 |
244 |
822 |
|
842 |
 |
Investments in associates |
9 |
|
3 |
12 |
|
18 |
| |
Loans and receivables |
35 |
|
|
35 |
|
33 |
  |
Deferred tax assets |
|
68 |
|
68 |
|
66 |
| |
|
690 |
68 |
247 |
1,005 |
|
1,045 |
| |
|
|
|
|
|
|
|
| |
Current assets |
|
|
|
|
|
|
| |
Trade and other receivables |
1,427 |
-38 |
9 |
1,398 |
|
1,308 |
| |
Cash and cash equivalents |
119 |
|
|
119 |
|
137 |
| |
|
1,546 |
-38 |
9 |
1,517 |
|
1,445 |
| |
Total assets |
2,236 |
30 |
256 |
2,522 |
|
2,490 |
| |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
| |
Equity and liabilities |
|
|
|
|
|
|
| |
Capital and reserves |
|
|
|
|
|
|
| |
Issued capital |
11 |
|
|
11 |
|
11 |
-  |
Reserves |
597 |
|
242 |
839 |
|
748 |
| |
Equity attributable to equity holders
of Vedior N.V. |
608 |
|
242 |
850 |
|
759 |
| |
|
|
|
|
|
|
|
| |
Minority interest |
55 |
|
|
55 |
|
60 |
| |
|
|
|
|
|
|
|
| |
Total equity |
663 |
|
242 |
905 |
|
819 |
| |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
| |
Non-current liabilities |
|
|
|
|
|
|
| |
Interest-bearing loans and borrowings |
471 |
|
1 |
472 |
|
551 |
| |
Retirement benefit obligations |
|
|
15 |
15 |
|
27 |
| |
Provisions |
41 |
-21 |
|
20 |
|
25 |
| |
Deferred tax liabilities |
|
10 |
|
10 |
|
10 |
| |
Other non current liabilities |
4 |
|
|
4 |
|
7 |
| |
|
516 |
-11 |
16 |
521 |
|
620 |
| |
Current liabilities |
|
|
|
|
|
|
 |
Trade and other payables |
922 |
20 |
-2 |
940 |
|
864 |
| |
Interest-bearing bank overdrafts and loans |
135 |
|
|
135 |
|
167 |
| |
Provisions |
|
21 |
|
21 |
|
20 |
| |
|
1,057 |
41 |
-2 |
1,096 |
|
1,051 |
| |
|
|
|
|
|
|
|
| |
Total liabilities |
1,573 |
30 |
14 |
1,617 |
|
1,671 |
| |
Total equity and liabilities |
2,236 |
30 |
256 |
2,522 |
|
2,490 | Reclassifications
Under IFRS, some items are classified differently in the balance sheet as compared to Dutch GAAP. Computer software is classified as an intangible asset under IFRS whereas previously software was included in property and equipment. Deferred tax assets and liabilities are classified as non-current assets and liabilities under IFRS whereas under Dutch GAAP they were included as current assets and liabilities. Furthermore, some other non-current liabilities are now disclosed separately in the balance sheet, where previously they were included in long-term borrowings.
The impact on deferred tax of the adjustments described below is set out in note 6.
 Goodwill
The Group has applied IFRS 3 to all business combinations that have occurred since 1 January 2004 (date of transition to IFRS).
From 1 January 2004, goodwill is no longer amortised under IFRS, but is tested annually for impairment. Furthermore, goodwill will be valued at current exchange rates under IFRS, whereas measurement at historical exchange rates was applicable under Dutch GAAP.
The goodwill amounts in local currency will be translated to Euro at each reporting date and currency differences will be recorded in Shareholders’ equity.
As a result of the above adjustments, the 2004 net result and the carrying amount of goodwill in the balance sheet increased by €276 million for the financial year ended 31 December 2004.The amortisation charge of €276 million was written back, as presented with Other operating expenses. However, due to movements in exchange rates, the carrying value of the goodwill decreased by €22 million at 31 December 2004.
Under Dutch GAAP, goodwill arising on investments in associates was included with goodwill arising on other investments. Under IFRS, this goodwill which amounts to €4 million as at 31 December 2004, is reclassified under investments in associates and included in the carrying amount of associates. As a result the carrying amount of Goodwill is reduced by €4 million.
 Post-employment benefits
For defined benefit plans, IFRS requires that the assets and liabilities of the pension fund are accounted for by the employer.
The calculation of the income statement charges and the pension liability to be included in the balance sheet are based on actuarial assumptions. These assumptions relate principally to future salary increases and investment returns on the fund’s assets.
The effect is an increase in liabilities for employee benefits by €27 million at 1 January 2004 and by €15 million at 31 December 2004 and to increase Operating expenses by €1 million for the year ended 31 December 2004.
 Share-based payments
The Group applied IFRS 2 to its active share-based payment arrangements at 1 January 2005 except for equity-settled share-based payment arrangements granted before 7 November 2002.
Under Dutch GAAP the Group only expensed the cost for the Restricted Share Plan through the income statement. Under IFRS the cost for the stock option plans, the Restricted Share Plan and the stock purchase plan are taken into the income statement and accounted for at fair value.
The effect of accounting for equity-settled share-based payment transactions at fair value is an increase in operating expenses by €3 million for the year ended 31 December 2004. The adoption of IFRS 2 has no impact on consolidated reserves for equity settled plans. The expense recognised for the rendering of employee services received as consideration for share options granted will be deductible for tax purposes when the share options are exercised in certain countries.
 Real estate companies
In France, the Group has several small companies which have activities in developing and holding real estate and which were exempt from consolidation under Dutch GAAP, as their activities are not part of the core business.
Under IFRS this exemption is no longer applicable and all companies where the Group has management control are required to be consolidated as from 1 January 2004, regardless of the nature of their activities.
The effect of consolidating these entities is a decrease of €1 million of the investments in associates at 1 January 2004. The effect on sales and cost of sales is €8 million for the year ended 31 December 2004. There is no effect on the operating income over the year ended 31 December 2004.  Niscom disposal
In September 2004, our investment in the Japanese company, Niscom, was disposed of.
Under Dutch GAAP the profit on disposal was based on the carrying amount of goodwill as at September 2004. This book value was reduced by goodwill amortisation of €5 million in the first nine months of 2004. Under IFRS, this amortisation is added back, which leads to a lower gain on the disposal.
The effect has decreased the gain on the disposal of subsidiaries by €5 million over the year ended 31 December 2004.
 Deferred taxes
The above changes increased deferred tax assets based on an average tax rate of 31%:
| |
|
1 January 2004 |
31 December 2004 |
| |
|
|
|
| |
Post-employment benefits |
10 |
4 |
 |
Share based payments |
2 |
2 |
| |
Increase in deferred tax assets |
12 |
6 |  Equity
The effect of the above adjustments on retained earnings is as follows:
| |
|
1 January
2004 |
31 December 2004 |
| |
|
|
|
| |
Equity under Dutch GAAP |
826 |
663 |
| |
Goodwill |
|
254 |
| |
Post-employment benefits |
-7 |
-7 |
| |
Niscom disposal |
|
-5 |
| |
Equity under IFRS |
819 |
905 |
| |
|
|
|
| |
Attributable to: |
|
|
| |
Equity holders of Vedior N.V. |
759 |
850 |
| |
Minority interest |
60 |
55 |
| |
|
819 |
905 | 
Consolidated income statement For the year ended 31 December 2004
| |
in millions of Euro |
Dutch
GAAP |
Effects of
adopting IFRS |
IFRS |
| |
|
|
|
|
| |
Sales |
6,467 |
8 |
6,475 |
| |
Cost of sales |
-5,326 |
-8 |
-5,334 |
| |
Gross profit |
1,141 |
|
1,141 |
| |
|
|
|
|
|
Operating expenses |
-1,200 |
272 |
-928 |
| |
Operating income before special items |
-59 |
272 |
213 |
| |
Gain on disposal of subsidiaries |
23 |
-5 |
18 |
| |
Operating income |
-36 |
267 |
231 |
| |
|
|
|
|
| |
Finance costs |
-41 |
|
-41 |
| |
Share of profit of associates (after tax) |
1 |
|
1 |
| |
Profit before tax |
-76 |
267 |
191 |
| |
|
|
|
|
| |
Income tax expense |
-66 |
|
-66 |
| |
Profit for the period |
-142 |
267 |
125 |
| |
|
|
|
|
| |
Attributable to: |
|
|
|
| |
Equity holders of Vedior N.V. |
-151 |
267 |
116 |
| |
Minority interests |
9 |
|
9 |
| |
Profit for the period |
-142 |
267 |
125 |
| |
|
|
|
|
| |
Earnings per share |
|
|
|
| |
Basic earnings per share (Euro) |
0.73 |
-0.05 |
0.68 |
| |
Diluted earnings per share (Euro) |
0.72 |
-0.05 |
0.67 |
| |
|
|
|
|
| |
Earnings per share
Excluding gain on disposal of associates
and subsidiaries |
|
|
|
| |
|
|
|
| |
Basic earnings per share (Euro) |
0.66 |
-0.03 |
0.63 |
| |
Diluted earnings per share (Euro) |
0.65 |
-0.03 |
0.62 | |