Print this page1 New IFRS accounting policies
The following interpretations, issued by the International Financial Reporting Interpretations Committee (IFRIC), are effective for the first time in the current financial year and have been adopted by the group with no significant impact on its consolidated results or financial position:
IFRIC 4 – Determining whether an arrangement contains a lease (effective for annual periods beginning on or after 1 January 2006).
IFRIC 5 – Rights to interests arising from decommissioning, restoration and environmental rehabilitation funds (effective for annual periods beginning on or after 1 January 2006).
IFRIC 6 – Liabilities arising from participating in a specific market: waste electrical and electronic equipment (effective for annual periods beginning on or after 1 December 2005).
IFRIC 7 – Applying the restatement approach under IAS 29 – Financial reporting in hyperinflationary economies (effective for annual periods beginning on or after 1 March 2006).
IFRIC 8 – Scope of IFRS 2 – Accounting for share-based payments (effective for annual periods beginning on or after 1 May 2006).
IFRIC 9 – Reassessment of embedded derivatives (effective for annual periods beginning on or after 1 June 2006).
In August 2005, the International Accounting Standards Board (IASB) issued IFRS 7 – Financial instruments: disclosures, which contained new regulations concerning the disclosure of financial statements. IFRS 7 replaces the disclosure regulations of IAS 32 – Financial instruments: disclosure and presentation and must be applied to reporting periods that commence on or after 1 January 2007. Diageo adopted IFRS 7 early in its 2006 financial statements.
2 Exceptional items before taxation
Exceptional items are those that in management’s judgement, need to be disclosed by virtue of their size or incidence in order for the user to obtain a proper understanding of the financial information.
In the year ended 30 June 2007, operating profit included an exceptional gain of £40 million in respect of the sale of the site of the former brewery at Park Royal in the United Kingdom. An exceptional loss on business disposals of £1 million also arose in the year to 30 June 2007. In the year ended 30 June 2006, the gain on sale of shares in General Mills of £151 million and gains of £6 million in respect of other business disposals were identified as exceptional items.
In the year ended 30 June 2006 exceptional tax credits of £315 million were recognised within taxation related to the agreement of certain brand values with financial authorities that resulted in an increase in the group’s deferred tax assets.
3 Segmental analysis
Business analysis is presented under the categories of Diageo North America, Diageo Europe, Diageo International, Diageo Asia Pacific and Corporate, reflecting the group’s management and internal reporting structure.
Business analysis
| 2007 | 2006 | |||
|---|---|---|---|---|
| Sales £ million |
Operating profit/(loss) £ million | Sales £ million |
Operating profit/(loss) £ million | |
| North America | 2,915 | 850 | 2,968 | 829 |
| Europe | 3,765 | 723 | 3,834 | 737 |
| International | 2,031 | 499 | 1,784 | 445 |
| Asia Pacific | 1,131 | 196 | 1,042 | 199 |
| 9,842 | 2,268 | 9,628 | 2,210 | |
| Corporate | 75 | (109) | 76 | (166) |
| 9,917 | 2,159 | 9,704 | 2,044 | |
Geographical analysis of sales by destination:
| 2007 £ million |
2006 £ million |
|
|---|---|---|
| North America | 2,958 | 2,999 |
| Europe | 3,912 | 3,977 |
| Asia Pacific | 1,179 | 1,085 |
| Latin America | 813 | 671 |
| Rest of World | 1,055 | 972 |
| 9,917 | 9,704 |
Sales by geographical destination have been stated according to the location of the third party customers and an allocation of certain corporate items.
Certain businesses within Diageo International, for internal management purposes, have been reported within the appropriate region in the geographical analysis above. Corporate sales are allocated to Europe.
Corporate revenues and costs are in respect of central costs including finance, human resources and legal as well as certain information system, service centre, facilities and employee costs that are not directly allocated to the geographical operating units. They also include the revenues and costs in respect of rents receivable in respect of properties not used by Diageo in the manufacture, sale or distribution of premium drinks, exchange movements on short term intercompany trading balances and the results of Gleneagles Hotel.
The analysis of total assets for the group:
| 2007 £ million |
2006 £ million |
|
|---|---|---|
| North America | 842 | 872 |
| Europe | 1,063 | 1,190 |
| International | 808 | 789 |
| Asia Pacific | 406 | 350 |
| Moët Hennessy | 1,348 | 1,303 |
| Corporate and other | 9,489 | 9,423 |
| 13,956 | 13,927 |
In the above analysis of total assets of the group, ‘Corporate and other’ includes unallocated assets of £9,177 million (2006 – £9,185 million) comprising principally brands of £4,085 million (2006 – £4,283 million), property, plant and equipment of £1,144 million (2006 – £1,114 million) and maturing inventories of £1,582 million (2006 – £1,483 million). Brands that are capitalised in the balance sheet are sold throughout the world and are not readily allocable to North America, Europe, International and Asia Pacific. Property, plant and equipment and maturing inventories classified as unallocated are principally located in Scotland and are not readily allocable to the group’s operating segments.
4 Discontinued operations
In the year ended 30 June 2007, a tax benefit of £82 million arose from the recognition of capital losses arising on the prior year disposals of the Pillsbury and Burger King businesses. In addition, a tax credit of £57 million arose following resolution with tax authorities of various audit issues including prior year disposals.
5 Movements in total equity
| 2007 £ million |
2006 £ million |
|
|---|---|---|
| Total equity at beginning of the year | 4,681 | 4,626 |
| Adoption of IAS 39 on 1 July 2005 | 164 | |
| Restated total equity at beginning of the year | 4,790 | |
| Total recognised income and expense for the year | 1,778 | 2,198 |
| Dividends paid to equity shareholders | (858) | (864) |
| Dividends paid to minority interests | (41) | (40) |
| New share capital issued | 1 | 3 |
| Share trust arrangements | 77 | 16 |
| Tax on share trust arrangements | 12 | 6 |
| Purchase of own shares for cancellation or holding as treasury shares | (1,481) | (1,428) |
| Acquisitions of minority interests | 1 | – |
| Net movement in total equity | (511) | (109) |
| Total equity at end of the year | 4,170 | 4,681 |
Total equity at the end of the period includes gains of £42 million in respect of cumulative translation differences (2006 – gains of £107 million) and £2,333 million in respect of own shares held as treasury shares (2006 – £2,070 million).