Imperial Chemical Industries (ICI)

1 Basis of presentation of financial information

This consolidated summary financial statement has been prepared in accordance with International Financial Reporting Standards (IFRS), International Accounting Standards (IAS) and related IFRIC interpretations in issue, that have been endorsed by the European Commission and are effective at 31 December 2006, or which ICI has chosen to adopt early at 31 December 2006 (‘adopted IFRS’). This is the Group’s second consolidated summary financial statement in accordance with adopted IFRS. The Group’s transition date to IFRS was 1 January 2004.

IFRIC 4 Determining whether an Arrangement contains a Lease came into effect from 1 January 2006 and provides guidance on whether complex arrangements include a lease. As a result of this requirement, certain arrangements have required reclassification as leases. In accordance with the transitional provisions, this has resulted in additional assets of £13m being recognised on the balance sheet at 1 January 2005, offset by the recognition of associated finance lease creditors of £17m, which are included within net debt. As a consequence, net assets at 1 January 2005 were restated from £(310)m to £(314)m. Net debt at 1 January 2005 has been restated from £989m to £1,006m. Equity at 1 January 2005 has been restated from £(247)m to £(251)m. Operating profit for 2005 has increased slightly but has been offset by a similar increase in the net finance expense, consequently, profit before taxation for 2005 is unchanged.

1 Basis of presentation of financial information

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), International Accounting Standards (IAS) and related IFRIC interpretations in issue, that have been endorsed by the European Commission and are effective at 31 December 2006, or where ICI has chosen to adopt early at 31 December 2006 (‘adopted IFRS’).

This is the Group’s first consolidated financial statement in accordance with adopted IFRS and IFRS 1 First-time Adoption of International Financial Reporting Standards. The Group’s transition date for adoption of IFRS is 1 January 2004. The Group has applied the exemption by the US Securities and Exchange Commission from the provision of a second year of comparatives. The disclosures required by IFRS 1 concerning the transition from UK GAAP to IFRS are given in note 5.

The Group’s accounting policies as set out in the 2004 Annual Report and Accounts have been revised where applicable to conform to IFRS. The complete accounting policies are set out in the 2005 Annual Report and Accounts. IFRS 1 permits those companies adopting IFRS for the first time to take certain exemptions from the full requirements of IFRS in the transition period. These policies have been consistently applied to all the years presented and in preparing the opening IFRS balance sheet at 1 January 2004 for the purpose of the transition to IFRS except for those relating to the classification and measurement of financial instruments. The comparative figures in respect of 2004 have been restated to reflect these changes in accounting policies accordingly.