IFRS

Summary of differences between IFRS and UK GAAP

The Group adopted IFRS in 2006 with the following key changes:

Presentation of financial statements

The presentation format of IFRS is different from UK GAAP and the illustrative financial information herein is designed to assist the reader in understanding these changes.

Events After the Balance Sheet Date

Dividends proposed will be disclosed as a 'Non-adjusting Event after the Balance Sheet Date' under IAS 10, Events after the Balance Sheet Date. Under IFRS dividends are not recognised as liabilities (IAS 37, Provisions, Contingent Liabilities and Contingent Assets) until they are appropriately approved and are no longer at the discretion of the directors. Accordingly the 2004 proposed dividend amount under UK GAAP is removed from the IFRS accounts.

Leases

This standard has a wider scope than UK GAAP and has to resulted in a small number of short leasehold buildings being capitalised on the Balance Sheet.

Share-based Payments

All transactions within the scope of IFRS 2 are valued based on the fair value of the option or award at grant date and expensed to the Income Statement over the vesting period of the scheme.

Employee Benefits

The main difference between IFRS and UK GAAP is the measurement of scheme assets. The IFRS valuation is determined at bid rather than midmarket price thus increasing the Group's pension scheme liabilities. In addition, there is a presentational difference with the pension scheme liability now being shown gross of its deferred tax asset.

Employee Benefits

IAS 19 requires the recording of a holiday pay accrual. This has been included in the opening IFRS balance sheet at 29 December 2003. Although it is expected that this adjustment will be relatively stable in magnitude from one year to another, when comparing the year end and interim periods there is a balance sheet movement and income statement impact.

Intangible Assets

Under IAS 38 goodwill is not amortised. Instead it is subject to an annual impairment review. An adjustment has been made to remove the goodwill amortisation charge.

Investments in Associates

IFRS requires the share of profit of Associate to be shown post tax (IAS 1). Under UK GAAP this amount is shown before tax with the tax charge included as part of the Group tax charge.

Deferred Tax

IAS 12 requires a deferred tax liability to be recognised on all temporary timing differences. A potential liability arises from the difference between the fair value attributed to publishing rights and titles from previous acquisitions. As the Group has elected, under IFRS 1, not to restate prior acquisitions at transition date to an IFRS 3 basis then recognition is against equity reserves rather than against goodwill. Also included in this adjustment is the liability for gains deferred by rollover and held-over relief.

Cash Flow

The differences between UK GAAP and IFRS cash flows relate to the reclassification of some of the Group's UK GAAP operating lease payments as finance lease payments under IFRS and the IAS 19 finance costs not charged to the Group's income statement under UK GAAP. There is no impact on the final cash position nor the movement in the period. The IFRS cash flow with comparative information is presented on page 62. The reconciliations of equity and profit below, together with the explanations of the changes, are provided to facilitate the understanding of changes arising from the adoption of IFRS.

Further information about the transition to IFRS can be found in the relevant notes in the 2005 Annual Report