US GAAP

See reconciliations of net income and shareholders’ equity under UK and US GAAP. See a discussion of the relevant US accounting policies which differ materially from UK GAAP. Two additional accounting adjustments were made in 1998.

Firstly, a deduction of £2 million before tax was made in respect of the recognition of revenue from sales of software subject to millennium warranties. Under UK GAAP, revenue and related direct costs from contracts for the outright sale of software systems are recognised at the time of client acceptance. Under US GAAP, specific rules were introduced with effect from January 1998 for the determination of client acceptance in cases where future significant modifications or upgrades to the software are considered to be part of the client’s overall acceptance of the product. Under these rules, an amount of revenue is required to be deferred until these software upgrades have been delivered and accepted by the client.

The adjustment made for 1998 of £2 million compares with a £22 million adjustment required in the first half of 1998. The fall reflects the progress in the second half of 1998 in the delivery and installation of millennium compliant software.

Secondly, a different accounting treatment is required under US GAAP to reflect the impact of the capital reorganisation in February 1998. Under US GAAP this transaction was deemed to be a share consolidation combined with a special dividend and requires retroactive restatement of earnings per share and per ADS and dividends per share and per ADS. Under UK GAAP no restatement of earnings per share was deemed necessary as the return of capital was considered to be equivalent to a repurchase of shares at market value and the number of new shares in Reuters Group PLC was set to facilitate comparability with those of Reuters Holdings PLC.