Notes to the financial statements

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38 Reconciliations of UK GAAP to IFRS for comparative periods

Under IFRS, the "Total recognised income and expense" is the equivalent of "Total return", as reported previously. In order to comply with IFRS 1, we provide below a reconciliation of total return to the net profit per the income statement.

Notes

1. Under IFRS, quoted investment assets are valued at bid price. Under UK GAAP, these had been valued at mid-market price with discounts applied for illiquidity.
2. 3i uses derivatives in the form of swap and forward exchange contracts to manage exposures to interest rates and currency. Under IFRS, these are held at fair value whereas they were held at cost under UK GAAP.
3. Under UK GAAP, the Convertible Bonds which were issued on 1 August 2003 were held at the face value of the bonds (€550 million). Under IFRS, the derivative element of the bonds is held at fair value. The liability is held at amortised cost.
4. Under UK GAAP, the approach in respect of share-based payments was to record a charge in profit or loss based on the intrinsic value of awarded shares at the grant date, with the charge being spread over the performance period. IFRS 2 requires the fair value of the equity instruments issued to be recognised in profit and loss over the vesting period of the instrument. The cost is calculated using option pricing methods and applies to all options granted after 7 November 2002 and not vested by 1 January 2005.
5. Under IFRS, revenue items will be held at the rates in force at the time of the transaction. Exchange differences on the retranslation on consolidation of the opening net investment in foreign entities and the retranslation of profit or loss items to closing rate are recorded as movements on reserves.
6. Under IFRS, unrealised profits or losses on the revaluation of properties in use by the Group are taken directly to equity and do not appear in the income statement.
7. Under IFRS, the actuarial gain or loss on retirement benefit obligations is taken directly to equity and does not appear in the income statement.
8. Under IFRS, dividends declared after the balance sheet date are not recognised as a liability at the balance sheet date.
9. Under UK GAAP, investment in limited partnerships were treated as an intrinsic part of the Parent Company. Under IFRS it is more appropriate to show these investments as subsidiaries. The 3i Group Employee Trust is now treated as a separate entity rather than an intrinsic part of the Company. The limited partnerships and the Trust form part of the Group consolidation.
10. Under IFRS, short-term deposits are classified as cash equivalents whereas they were included in liquid resources under UK GAAP. The move from UK GAAP does not significantly change any of the cash flows of the Group.