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These excerpts taken from the ICI 6-K filed Mar 21, 2007. (v) Derivative instruments and hedging activities The charge of £15m (2005 £2m charge) under the line item “net investment hedge” represents the reversal of the exchange gain recognized under IFRS on the part of the debt that cannot be hedged. This is recognized directly in reserves under US GAAP, but in the income statement under IFRS. The Group mark-to-market all derivatives under IFRS and US GAAP. The credit of £24m (2005 £25m credit) relating to the mark-to-market of derivatives represents the movement in the employee share ownership plan (ESOP) forward contracts to purchase own shares that are “out of the money” of £22m (2005 £22m credit) and an amount of £2m (2005 £3m credit) representing the partial unwind of transition adjustments for the adoption of SFAS No. 133. The difference in amounts recognized on the balance sheet under IFRS and US GAAP of £109m (2005 £98m) under the heading “Financial liabilities” include the reduction in liabilities relating to ESOP forward contracts of £96m (2005 £87m) and transition adjustments of £1m (2005 £3m) relating to the adoption of SFAS No. 133 (additional liability) and a reduction in liabilities of £14m (2005 £14m) upon adoption of IAS 39.
(v) Derivative instruments and hedging activities The charge of £15m (2005 £2m charge; 2004 £15m charge) under the line item “net investment hedge” represents the reversal of the exchange gain recognised under IFRS on the part of the debt that cannot be hedged. This is recognised directly in reserves under US GAAP, but in the income statement under IFRS. The Group mark-to-market all derivatives under IFRS and US GAAP. The credit of £24m (2005 £25m credit; 2004 £12m charge) relating to the mark-to-market of derivatives represents the movement in the employee share ownership plan (ESOP) forward contracts to purchase own shares that are “out of the money” of £22m (2005 £22m credit; 2004 £10m credit) and an amount of £2m (2005 £3m credit; 2004 £3m credit) representing the partial unwind of transition adjustments for the adoption of SFAS No. 133. In 2004, the Group did not designate any of its derivative instruments as hedges for US GAAP accounting purposes. The income statement reconciliation in 2004 includes a charge of £25m for the adjustment to fair value of the Group’s derivatives (in 2004 the Group took the exemption in IFRS not to adopt IAS 32 and IAS 39 and therefore amounts were accounted for under UK GAAP). The difference in amounts recognised on the balance sheet under IFRS and US GAAP of £109m (2005 £98m) under the heading “Financial liabilities” include the reduction in liabilities relating to ESOP forward contracts of £96m (2005 £87m) and transition adjustments of £1m (2005 £3m) relating to the adoption of SFAS No. 133 (additional liability) and a reduction in liabilities of £14m (2005 £14m) upon adoption of IAS 39.
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