Adoption of new Accounting Standards for Syngenta

Send us Feedback

Syngenta AG (SYT)

	SUMMARY

	BULLS

	BEARS

	TOPICS

	DATA CENTRAL

	STOCK CHART

	SEC FILINGS

	BALANCE

	INCOME

	CASH FLOW

SYT » Topics » Adoption of new Accounting Standards

This excerpt taken from the SYT 20-F filed Mar 1, 2006.

Adoption of new Accounting Standards

Syngenta has adopted the following new or revised Accounting Standards in these consolidated financial statements, with the following effect:

	—	IFRS 3, “Business Combinations”, IAS 36 “Impairment of Assets” (revised March 2004) and IAS 38, “Intangible Assets” (revised March 2004) were applied to the Garst and Golden Harvest acquisitions (see Note 3) in Syngenta’s 2004 financial statements. As permitted by their transitional provisions, Syngenta has applied these new and revised standards prospectively as from January 1, 2005 to goodwill arising in all other business combinations. Goodwill has therefore not been amortized in 2005, but has been tested for impairment. Goodwill amortization expense in 2004 was US$56 million.

	—	IAS 16, “Property, Plant and Equipment” (revised December 2003). With effect from January 1, 2005, subsequent expenditure on existing assets has been capitalized when a component is replaced. Previously, component replacement was expensed as incurred if the asset’s originally assessed standard of performance was not enhanced but merely restored. This has reduced 2005 cost of goods sold by approximately US$3 million compared to continuing the previous policy. There is no effect on prior periods.

	—	IAS 32, “Financial Instruments: Presentation and Disclosure” (revised December 2003 and June 2005) and IAS 39 “Financial Instruments: Recognition and Measurement” (revised December 2003, March 2004, April 2005 and August 2005). Adoption had the following effect:

	—	An impairment loss is now recorded when the market value of an available-for-sale financial asset shows a significant or prolonged decline below its original cost, as adjusted for previous impairments. Previously, an impairment loss would only have been recorded if there was evidence of severe financial difficulties or defaults at the investee company. Impairment losses of US$53 million less tax of US$9 million, originally reported as unrealized holding losses in the fair value reserve component of shareholders’ equity, have been deducted from the reported brought forward balance of retained earnings as at January 1, 2003. The consolidated income statement for 2003 has been retroactively adjusted to include US$3 million of impairment losses, less tax of US$1 million, which were also originally reported as unrealized holding losses in shareholders’ equity. There is no material effect on the 2004 consolidated income statement. An impairment loss of US$19 million has been reported in the 2005 consolidated income statement. Under the previous policy, this would also have been reported as an unrealized holding loss in shareholders’ equity.

	—	Gains and losses on hedges of currency exposures arising from forecast sales and purchases between Syngenta subsidiaries are now recognized in profit or loss when the related third party sale transaction occurs. Previously, they were recognized when the inter-company forecast transaction occurred. The effect for Syngenta is that these gains and losses remain deferred in the cash flow hedge reserve in shareholders’ equity for on average approximately 120 days longer than previously, before recognition in profit or loss. Syngenta has applied the new policy prospectively as from January 1, 2005, as permitted by the transition provisions of the relevant amendment to IAS 39. 2004 and prior years’ reported figures have not been adjusted. The effect of the new policy on the 2005 consolidated income

F-10

		statement is to increase pre-tax income by US$17 million, representing hedging losses deferred until 2006, which would have been recognized in 2005 under the previous policy.

	—	Syngenta has not designated any financial instrument as “at fair value through profit or loss”. The amendment to IAS 39 which allows this new designation has had no effect on these financial statements.

	—	IAS 21, “The Effects of Changes in Foreign Exchange Rates” was amended in December 2005 to clarify that long-term monetary items which form part of the net investment in a subsidiary may be receivable from or payable to a fellow subsidiary, and are not restricted to the ultimate or intermediate parent of the subsidiary. This was already Syngenta’s interpretation of IAS 21 and its adoption had no effect on these financial statements. The amendment also allows the monetary item to be denominated in any currency. Before the amendment, IAS 21 (revised December 2003) required the item to be denominated in the functional currency of the subsidiary or of the reporting entity. Adoption of this change had no effect on these financial statements.

	—	IFRIC 1, “Changes in Existing Decommissioning, Restoration and Similar Liabilities”. Adoption of IFRIC 1 had no effect on these financial statements.

	—	IFRIC 7, “Applying the Restatement Approach under IAS 29, Financial Reporting in Hyperinflationary Economies”. This new interpretation applies where an economy becomes hyperinflationary. Syngenta has adopted IFRIC 7 early. Adoption of IFRIC 7 had no material effect on these financial statements.

	—	IFRIC Amendment to SIC-12, “Special Purpose Entities”. The amendment requires employee share trusts and similar entities established under share participation plans to be consolidated. Adoption of the amendment had no effect on these financial statements.

F-11

This excerpt taken from the SYT 20-F filed Mar 16, 2005.

Adoption of new Accounting Standards

Syngenta has adopted the following new or revised Accounting Standards in these consolidated financial statements, with the following effect:

—	IAS 1, “Presentation of Financial Statements” (revised December 2003). Minority interests have been shown in the consolidated income statement for each period, as an attribution of net profit or loss, and in the consolidated balance sheet as part of total equity.

—	IAS 21, “The Effects of Changes in Foreign Exchange Rates” (revised December 2003). Adoption had the following effects:

	—	Goodwill and fair value adjustments arising on acquisitions will now be treated as denominated in the functional currency of the acquired entity(ies). Previously, Syngenta treated them as denominated in its group presentation currency, US dollars. As permitted by the Standard’s transitional provisions, Syngenta has applied the new policy prospectively to acquisitions completed after January 1, 2004. The effect of the new policy on the 2004 consolidated financial statements was not material. Its effect on future periods will depend on whether and what future acquisitions occur.

	—	Unrealized exchange differences on certain intercompany loans which form part of Syngenta’s net investment in the borrowing subsidiary have been recognized in the income statement, as they are no longer permitted to be recognized directly in shareholders’ equity. The effect on 2004 net income and shareholders’ equity was not material. This change has been implemented retrospectively. The consolidated cash flow statements are not affected by this change. There is no effect on the consolidated balance sheet, except for reclassification of certain exchange losses from other reserves to retained earnings.

—	IFRS 2, “Share Based Payment”. Syngenta has recognized the fair value of share and share option grants to employees as compensation expense in the consolidated income statement, as required by IFRS 2. Syngenta has implemented the new policy retrospectively to all previous grants. US$33 million of compensation expense was charged in 2004, mainly within General and administrative in the income statement. Under Syngenta’s previous policy, the corresponding 2004 movement in shareholders’ equity would have been US$33 million lower than reported in these financial statements. This charge did not have a net effect on the consolidated cash flow statement or balance sheet, because Syngenta’s share based payment schemes are equity settled, and the expense is matched by an entry directly increasing retained earnings. However, IFRS 2 also requires a deferred tax asset to be recognized if a tax deduction will be claimed for the expense. 2004 deferred income tax expense has therefore been reduced by US$8 million, shareholders’ equity increased by US$13 million, and deferred tax assets increased by US$21 million as a result.

—	IFRS 3, “Business Combinations”. This new standard must be applied to all combinations with an agreement date after March 31, 2004. Syngenta has applied IFRS 3, together with IAS 36, “Impairment of Assets” (revised March 2004) and IAS 38, “Intangible Assets” (revised March 2004), to the Advanta and Golden Harvest ^®acquisitions (see also Note 3), which were agreed on May 12, 2004 and June 25, 2004 respectively. Goodwill arising on these acquisitions has not been amortized, but has been tested for impairment as required by IAS 36 (revised). As permitted by the transitional provisions of IFRS 3, Syngenta will apply the new accounting policy for goodwill to acquisitions agreed before March

F-8

	31, 2004, as from January 1, 2005. Goodwill amortization expense on these acquisitions in 2004 was US$56 million. From January 1, 2005 this goodwill will no longer be amortized, but will be tested for impairment annually. Also, costs of restructuring the acquired businesses have been charged to the consolidated income statement. Previously, in accordance with IAS 22, restructuring costs were debited to goodwill if Syngenta announced the restructuring on or before acquisition and developed a detailed formal restructuring plan within three months of acquisition.

—	IFRS 5, “Non-current Assets Held for Sale and Discontinued Operations”. This new standard requires assets and related liabilities which meet the IFRS 5 definition of “held for sale” to be measured at the lower of fair value less selling costs, and their carrying amount at the date they first meet the held for sale criteria. These assets and liabilities must be presented separately in balance sheets prepared at dates after they are considered held for sale. Balance sheets for earlier periods are not restated. In addition, where the assets and liabilities being divested represent a major product line or geographical area, all results of the business being divested are shown as a single post-tax amount in the income statement, described as “Discontinued operations”. Income statements for previous periods are adjusted so that presentation is consistent.

—	Syngenta has applied IFRS 5 to the 2004 divestments described in Note 3 below. SF-Chem AG and the Advanta businesses and subsidiaries which were sold to Fox Paine & Co. have been shown as discontinued operations in the 2004 consolidated income statement. The 2002 and 2003 consolidated income statements and cash flow statements have been represented to show SF-Chem AG as a discontinued operation. Certain other proposed asset divestments have been shown as held for sale in the 2004 consolidated balance sheet, but do not meet the definition of discontinued operations. No divestment transaction which occurred before 2004 has been affected by adoption of IFRS 5. Therefore, the 2002 and 2003 consolidated balance sheets are unaffected.

—	In addition, Syngenta adopted the following standards, certain of which required increased disclosures, but which did not affect the consolidated income statement, balance sheet or cash flow statement:

		IAS 2, “Inventories”, (revised December 2003) IAS 8, “Accounting Policies, Changes in Accounting Estimates and Errors” (revised December 2003) IAS 10, “Events after the Balance Sheet Date” (revised December 2003) IAS 17, “Leases” (revised December 2003) IAS 24, “Related Party Disclosures” (revised December 2003) IAS 27, “Consolidated and Separate Financial Statements” (revised December 2003) IAS 28, “Investments in Associates” (revised December 2003) IAS 31, “Interests in Joint Ventures” (revised December 2003) IAS 33, “Earnings per share” (revised December 2003) IAS 40, “Investment Property” (revised December 2003) IFRS 4, “Insurance Contracts”

EXCERPTS ON THIS PAGE:

20-F	Mar 1, 2006

20-F	Mar 16, 2005

Syngenta AG (SYT)

SYT » Topics » Adoption of new Accounting Standards

EXCERPTS ON THIS PAGE:

RELATED TOPICS for SYT: