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  • Reconciliations between IFRS and UK GAAP

  • RECONCILIATIONS BETWEEN IFRS AND UK GAAP

    The following reconciliations provide a quantification of the effect of the transition to IFRS. The following seven reconciliations provide details of the impact of the transition on:

    Income Statement 31 December 2004 Balance Sheet at 31 December 2004 Cash flows 31 December 2004 Income Statement 30 June 2004 Balance Sheet at 30 June 2004 Cash flows 30 June 2004 Balance Sheet at 1 January 2004

    The impact of IFRS adoption on the consolidated results and financial position of Premier is addressed separately for each Balance Sheet, the Income Statement and Statement of Cash flows. Notes have been prepared to explain the key changes from UK GAAP to IFRS. The basis of preparation and accounting policies for these statements are the same as given in the Restatement of results under IFRS document issued on 25 August 2005 and available on the Premier Oil plc website.

  • RECONCILIATIONS BETWEEN IFRS AND UK GAAP

    Income Statement Reconciliation For the year ended 31 December 2004

    Notes (a) (b) (c) (d) (e) (f) (g) UK GAAP

    Numbers in IFRS format

    Joint venture

    proportional consolidation

    Employee benefits

    Pre licence costs write back write-

    off

    Deferred PRT

    Exploration cost

    write-off

    PKP 2004 IFRS adjustments

    Amortisation impact

    Year to 31 December

    2004 (restated)

    $ million $ million $ million $ million $ million $ million $ million $ million $ million Sales and other operating revenues 196.0 55.8 251.8 Gain on sale of investment/fixed assets Sales revenue and other income 196.0 55.8 251.8 Cost of sales (108.4) (20.6) 2.4 (8.0) (134.6) Exploration expense (14.3) 3.9 (23.9) (6.6) (40.9) General and administration costs (15.5) (1.5) (17.0) Share on net income from joint ventures 23.6 (23.6) Operating profit 81.4 11.6 (1.5) 3.9 (23.9) (4.2) (8.0) 59.3 Interest income 1.9 0.1 2.0 Interest, exchange and other finance expense (7.6) (0.2) (7.8) Profit before taxation 75.7 11.5 (1.5) 3.9 (23.9) (4.2) (8.0) 53.5 Taxation (31.9) (11.5) 4.5 2.6 1.3 3.6 (31.4) Profit after taxation 43.8 - (1.5) 3.9 4.5 (21.3) (2.9) (4.4) 22.1 Earnings per share (cents) Basic 53.0 26.8 Diluted 52.1 26.3

    Movement in shareholders' equity under IFRS

    $ million At 31 December 2003 388.8 Adoption of IFRS (please refer to opening balance sheet) (51.3) As restated at 1 January 2004 337.5 Profit for the period 22.1 Currency translation differences (0.4) Restructuring adjustment (1.2) Purchase of shares for ESOP trust [note (h)] (3.2) Issue of ordinary shares 5.2 Repurchase of ordinary share capital (5.9) Shareholders' equity at the year end 354.1 Cash flow hedges IAS 39 adoption [note (i)] UNAUDITED (5.4) Shareholders' equity at 1 January 2005 - UNAUDITED 348.7

  • RECONCILIATIONS BETWEEN IFRS AND UK GAAP

    Notes

    (a) Joint ventures proportional consolidation: Joint venture arrangements which involve the establishment of a separate entity in which each venturer has an interest are referred to as jointly controlled entities (JCEs). Under IFRS the Group will report its interests in jointly controlled entities using proportionate consolidation i.e. the Groups share of the assets, liabilities, income and expenses of jointly controlled entities are combined with the equivalent items in the consolidated financial statements on a line-by-line basis.

    Under UK GAAP the Group accounted for its 50 per cent share in Premier-Kufpec Pakistan BV (PKP) as an interest in a joint venture under FRS 9 Associates and Joint Ventures. FRS 9 required the Group to show its proportion of operating profit or loss, exceptional items, interest, taxation, gross assets and gross liabilities of the joint venture as part of the financial statements. The change to proportional consolidation will result in a major presentational change in the way JCE balances are stated on the face of the income statement. However this will not result in any impact on the net profits of the group.

    (b) Employee Benefits: The Group has elected to recognise all cumulative actuarial gains and

    losses as at 31 December 2004 on all of its long term employee benefit schemes including funded pension plan. The impact of this election is a US$(1.5) million additional charge in the income statement.

    (c) Pre-License costs: IFRS requires that all pre-licence costs are written off in the year that they

    are incurred. On transition to IFRS all such costs existing at 1 January 2004 were written off to shareholders funds. Some of the costs which remained capitalised at 1 January 2004 under UK GAAP were written off in the UK GAAP 2004 results as the related projects were considered unsuccessful. This adjustment reverses the impact of such write offs in the 2004 income statement, as they had already been written off on transition, amounting to $3.9 million.

    (d) Deferred Petroleum Revenue Tax (PRT): IFRS requires that deferred PRT be calculated on a

    temporary difference basis, a departure from Premiers former unit of production (UOP) method. This has resulted in a higher provision in the opening IFRS Balance Sheet and a portion ($4.5 million) of the additional provision has been released during 2004 due to the reversal of temporary differences.

    (e) Exploration Expense: The Group has adopted an IFRS accounting policy for Exploration and

    Evaluation Assets that is more aligned with the UK GAAP successful efforts accounting practice rather than its previously adopted policy of accounting for such costs under full cost method. Under the successful efforts method of accounting, all licence acquisition, exploration and appraisal costs are initially capitalised in well, field or general exploration cost centres as appropriate, pending determination. Expenditure incurred during the various exploration and appraisal phases is then written off unless commercial reserves have been established or the determination process has not been completed.

    Based on this new policy the Group has written off certain exploration costs incurred in 2004 in Guinea Bissau, Gabon, North Sea and Mauritania related to unsuccessful exploration wells amounting to $23.9 million.

    (f) Exploration and Evaluation Assets Accounting - PKP Joint venture: The Group has adopted

    an IFRS accounting policy for Exploration and Evaluation Assets that is more aligned with the UK GAAP successful efforts accounting practice rather than its previously adopted policy of

  • RECONCILIATIONS BETWEEN IFRS AND UK GAAP

    accounting for such costs under full cost method. In the PKP joint venture adoption of this policy resulted in a reduced amortisation charge of $2.4 million, additional exploration expense of $6.6 million and a reduction in the taxation charge by $1.3 million.

    (g) Property plant and equipment - Amortisation: IAS 16 requires that oil and gas property,

    plant and equipment is generally held in the balance sheet on a field by field basis. Given the age and history of the Premier Group it has not been possible to establish accurately the depreciated historical cost base for the individual fields in the UK and Far East cost pools, therefore, we have taken the benefit of the transition rules contained within IFRS 1 that allow fair values to be adopted on transition in place of depreciated historical cost amounts. The impact of this is an increase to fixed assets of $122.8 million, which has increased the amortisation charge by $8.0 million during 2004 which has been partially offset by a reduction in taxation (deferred tax release) of $3.6 million.

    (h) Long term incentive plan and Employees Share Option Plan Trust (ESOP) - IFRS 2

    requires all the shares purchased for ESOP trusts and provisions made for any future share based pay out to be presented within equity. This has resulted in the movement in shareholders funds during 2004 of $3.2 million due to purchase of further shares for the plan during 2004.

    (i) Hedging Fair Valuation: The Group elected to apply the IFRS1 exemption from restatement

    of comparatives for IAS 32 and IAS 39. It applies previous GAAP rules to derivatives, financial assets and financial liabilities and to hedging relationships for the 2004 comparative information. The adjustments required for differences between UK GAAP and IAS 32 and IAS 39 are determined and recognised from 1 January 2005. Group has fair valued its oil & gas options existing at 31 December 2004 and charged Hedging Liabilities to the opening 2005 equity amounting to $5.4 million. These adjustments are not part of the 31 December 2004 IFRS financial information, and are therefore unaudited.

  • RECONCILIATIONS BETWEEN IFRS AND UK GAAP

    Reconciliation of Equity and Net Assets As at 31 December 2004

    UK GAAP numbers in IFRS

    format

    (a) Joint venture proportional consolidation

    (b) Employee benefits

    (c) Pre licence costs

    Group

    (d) Deferred

    Petroleum Revenue Tax

    (e) PKP successful

    efforts adjustment

    (f) Far East

    successful efforts

    adjustment

    (g) North West

    Europe successful

    efforts adjustment

    (h) Successful

    efforts write off 2004

    (i) IFRS

    amortisation impact

    (j) Long term

    incentive plan and ESOP trust

    IFRS Balance Sheet

    31 Decemnber 2004

    $ million $ million $ million $ million $ million $ million $ million $ million $ million $ million $ million $ million Non current assets

    E

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