1. Changes in accounting policies

During the year, the Company has adopted FRS 21 ‘Events after the Balance Sheet Date’, FRS 23 ‘The Effects of Changes in Foreign Exchange Rates’, FRS 25 ‘Financial Instruments: Disclosure and Presentation’, FRS 26 ‘Financial Instruments: Measurement’, and FRS 29 ‘Financial Instruments: Disclosures’.

FRS 21 ‘Events after the Balance Sheet Date’

The adoption of FRS 21 has resulted in a change to the timing of recognition of the Company’s proposed final dividend. Previously such dividends were recorded as a liability in the year in respect of which they were proposed by the Board of Directors for approval by the shareholders. In accordance with FRS 21, such dividends are not recorded until approved. The adoption of FRS 21 has been reflected in the accounts as a prior year adjustment in accordance with FRS 3. This has resulted in an increase in net assets as at 31 March 2005 of £469m and an increase in retained earnings for the year ended 31 March 2005 of £103m.

FRS 23 ‘The Effects of Changes in Foreign Exchange Rates’

FRS 25 ‘Financial Instruments: Disclosure and Presentation’

FRS 26 ‘Financial Instruments: Measurement’

FRS 29 ‘Financial Instruments: Disclosures’

The adoption of FRS 23, FRS 25, FRS 26 and FRS 29 has resulted in a change to the accounting for the Company’s financial instruments. Derivative financial instruments and available-for-sale investments are recorded in the balance sheet at fair value, whilst deferred gains and losses relating to items qualifying for hedge accounting are derecognised and instead recorded in equity (for cash flow hedges and net investment hedges) or by adjusting the carrying value of the hedged financial instrument (for fair value hedges). As permitted by the transition provisions of FRS 26, prior year adjustments have not been made to the balance sheet at 31 March 2005 or to the profit and loss account for the year then ended.

The adoption of FRS 23, FRS 25, FRS 26 and FRS 29 reduced net assets at 1 April 2005 by £15m, as shown below:

	£m
Borrowings.	(213)
Derivative financial instruments	179
Other assets and liabilities	19
Net assets	(15)

 

It is not practical to calculate the impact of the adoption of FRS 23, FRS 25, FRS 26 and FRS 29 on the results for the year ended 31 March 2006.