Aviva 2005 Annual Report Download - page 196

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194 Financial statements continued
Financial statements of the Company
Notes to the company financial statements
For the year ended 31 December 2005
A – First time adoption of International Financial Reporting Standards
(i) The Company has adopted International Financial Reporting Standards (IFRS) for these financial statements for the year ended
31 December 2005. In order to show comparative balances, the year ended 31 December 2004 is also shown under IFRS. The date
of transition to IFRS is, therefore, 1 January 2004.
In general, a company is required to determine its IFRS accounting policies and apply these retrospectively to determine its opening balance
sheet under IFRS. However, International Financial Reporting Standard 1, First time adoption of International Financial Reporting Standards,
(IFRS 1) allows a number of exemptions to this general principle upon adoption of IFRS. Where applicable, the Company has taken
advantage of the same transitional arrangements as in the Group, as described in note 1(a).
(ii) Reconciliation of equity reported under UK GAAP to equity reported under IFRS
As at As at
1 January 31 December
2004 2004
£m £m
Equity as reported under UK GAAP 10,752 12,937
Adjusted for:
Dividend recognition (see (1) below) 6 (1,344)
Revaluation of investments in subsidiaries (see (2) below) 1,911 4,200
Pensions (see (3) below) (4) (27)
Equity compensation plans (see (4) below) –28
Direct Capital Instrument interest –6
Other items (2) 4
12,663 15,804
Deferred tax impact of above adjustments 18
Equity as reported under IFRS 12,664 15,812
(iii) Reconciliation of profit and loss reported under UK GAAP to profit and loss reported under IFRS
For the year ended
31 December 2004
£m
Profit for the year as reported under UK GAAP 1,469
Adjusted for:
Dividend recognition (see (1) below) (1,372)
Pensions (see (3) below) (23)
Equity compensation plans (see (4) below) 13
87
Deferred tax impact of above adjustments 7
Profit for the year as reported under IFRS 94
(iv) Adjustments between UK GAAP and IFRS
The basis for the material adjustments between UK GAAP and IFRS is as follows:
(1) Dividend recognition
Under UK GAAP, dividends are accrued in the period to which they relate, regardless of when they are declared and approved. Under IAS
10, Events after the Balance Sheet Date, shareholders’ dividends are accrued only when declared and appropriately approved. This affects
both dividends receivable from subsidiaries and those payable to shareholders, increasing shareholders’ funds by £6 million at 1 January
2004 and reducing them by £1,344 million at 31 December 2004. Profit for the year ended 31 December 2004 was similarly reduced by
£1,372 million as a result.
(2) Investments in subsidiaries
Under UK GAAP, subsidiaries are stated at current value which, for this purpose, is embedded value for life operations and net asset
value for other entities. As a result of applying IAS 39, subsidiaries are stated at their fair values, estimated using applicable valuation
models underpinned by the Company’s market capitalisation. This uplift in valuation has increased shareholders’ funds by £1,911 million
at 1 January 2004 and by £4,200 million at 31 December 2004.
Aviva plc 2005 Financial statements