RTR 2005-01-01 2005-12-31 RTR 2004-01-01 2004-12-31 RTR 2005-12-31 RTR 2004-12-31 RTR 2005-01-01 RTR 2004-01-01 RTR 2005-01-01 2005-12-31 RTR 2005-01-01 2005-12-31 RTR 2004-01-01 2004-12-31 RTR 2004-01-01 2004-12-31 RTR 2005-01-01 2005-12-31 RTR 2005-01-01 2005-12-31 RTR 2005-01-01 2005-12-31 RTR 2005-01-01 2005-12-31 RTR 2005-01-01 2005-12-31 RTR 2004-01-01 2004-12-31 RTR 2004-01-01 2004-12-31 RTR 2004-01-01 2004-12-31 RTR 2004-01-01 2004-12-31 RTR 2004-01-01 2004-12-31 iso4217:GBP iso4217:GBP xbrli:shares 2409000000 -2251000000 49000000 207000000 -53000000 41000000 38000000 5000000 238000000 -9000000 229000000 253000000 482000000 456000000 26000000 0.326 0.317 0.163 0.159 2339000000 -2187000000 42000000 194000000 -27000000 15000000 203000000 11000000 396000000 -40000000 356000000 19000000 375000000 364000000 11000000 0.26 0.254 0.254 0.248 -38000000 106000000 -2000000 -33000000 -55000000 -27000000 -10000000 -237000000 -296000000 186000000 374000000 -188000000 -160000000 -58000000 6000000 0 0 0 0 0 -212000000 163000000 166000000 -3000000 1179000000 957000000 1000000 2137000000 -736000000 -831000000 0 -1567000000 570000000 360000000 107000000 -1692000000 1795000000 570000000 0 570000000 1025000000 1410000000 145000000 2580000000 -1249000000 -714000000 -47000000 -2010000000 570000000 359000000 96000000 -1755000000 1671000000 371000000 199000000 570000000 271000000 55000000 -49000000 -24000000 253000000 -124000000 246000000 -145000000 3000000 -40000000 -1000000 85000000 5000000 29000000 10000000 -223000000 248000000 -144000000 -140000000 -23000000 -272000000 66000000 76000000 561000000 637000000 280000000 19000000 -30000000 -43000000 226000000 -78000000 438000000 -109000000 66000000 -27000000 -1000000 25000000 5000000 319000000 6000000 0 -105000000 -225000000 -140000000 0 -464000000 -33000000 48000000 513000000 561000000 570000000 129000000 699000000 -296000000 58000000 12000000 3000000 -224000000 -86000000 -54000000 -1000000 494000000 0 494000000 -212000000 41000000 6000000 4000000 0 -86000000 -54000000 2000000 99000000 2000000 1000000 33000000 0 30000000 -8000000 -18000000 16000000 -42000000 -5000000 -1000000 -41000000 53000000 9000000 2000000 3000000 -52000000 9000000 -27000000 -24000000 268000000 3000000 112000000 0 35000000 28000000 1000000 22000000 9000000 0 0 -207000000 -11000000 0 -15000000 27000000 40000000 -1000000 2000000 -98000000 -17000000 16000000 8000000 307000000 -27000000 0.0615 0.0385 0.0615 0.0385 0 69000000 184000000 0 1000000 39000000 -1000000 -20000000 379000000 375000000 576000000 651000000 428000000 374000000 393000000 577000000 609000000 386000000 REUTERS GROUP PLC Reuters (www.reuters.com), the global information company, provides indispensable information tailored for professionals in the financial services, media and corporate markets. Its trusted information drives decision making across the globe based on a reputation for speed, accuracy and independence. Reuters has 15,300 staff in 89 countries, including staff from the acquisition of Telerate in June 2005. It also includes 2,300 editorial staff in 189 bureaux serving 128 countries, making Reuters the world’s largest international multimedia news agency. In 2005, Reuters revenues were £2.4 billion. All adjustments on first time adoption were recorded in shareholders’ equity on the date of transition, except for adjustments relating to IAS 32 ‘Financial Instruments: Disclosure and Presentation’ and IAS 39 ‘Financial Instruments: Recognition and Measurement’ which were recorded in shareholders’ equity at 1 January 2005. The consolidated financial statements of the Group have been prepared under the historical cost convention, except as disclosed in the accounting policies presented below. Year ended 31 December 2005 The consolidated financial statements include the financial statements of Reuters Group PLC and its subsidiaries and the Group’s share of the post-acquisition results of joint ventures and associates. Amounts included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in pounds sterling, Reuters Group PLC’s functional and presentation currency. Transactions in foreign currencies are translated into the functional currency using the exchange rate prevailing at the date of the transaction. Foreign exchange gains and losses resulting from settlement of such transactions, and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies, are recognised in the income statement except when deferred in equity as qualifying cash flow and net investment hedges. Translation differences on non-monetary items, such as investments held to maturity, are reported as part of the fair value gain or loss. Translation differences on non-monetary items, such as available-for-sale financial assets and investments, are included in the fair value reserve in equity. Revenue represents the turnover, net of discounts, derived from services provided to subscribers and sales of products applicable to the period. Revenue from sales of subscription-based real-time and historical information services is recognised rateably over the term of the subscription. Revenue from associated maintenance and support services is recognised rateably over the term of the maintenance contract. Where contracts allow the Group to recharge costs from communications suppliers and exchanges onwards to subscribers, this income is recognised as revenue. Revenue from contracts for the outright sale of systems-based product solutions, which include the sale of fully developed software licences, is recognised at the time of client acceptance, at which time the Group has no further obligation. Long-term contracts are accounted for in accordance with the contractual terms either on a percentage of completion basis or on a time and materials as incurred basis. Interest income is accrued on a time basis by reference to the amount outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying value. Payments to defined contribution pension plans are charged as an expense to the income statement as incurred when the related employee service is rendered. The Group has no further legal or constructive payment obligations once the contributions have been made. For defined benefit pension plans, the cost of providing benefits is determined using the Projected Unit Credit Method and is charged to the income statement so as to spread the service cost over the service lives of the employees. An interest cost representing the unwinding of the discount rate on the scheme liabilities, net of the expected return on scheme assets, is charged to the income statement. The liability recognised in the balance sheet, in respect of defined benefit pension plans, is the present value of the defined benefit obligation at the balance sheet date less the fair value of the plan assets. The defined benefit obligation is calculated annually by independent actuaries. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in a currency in which the benefits will be paid and that have terms of maturity approximating to the terms of the relevant pension liability All actuarial gains and losses that arise in calculating the present value of the defined benefit obligation, and the fair value of plan assets, are recognised immediately in the statement of recognised income and expense. Post-retirement medical benefits are provided to employees of some Group companies. The expected costs are accrued over the service lives of the employees using an accounting methodology similar to that for defined benefit pension plans. Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the identifiable net assets (including intangible assets) of the acquired subsidiary, associate or joint venture at the date of acquisition. Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill on acquisition of associates and joint ventures is included in the carrying value of the investment. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on disposal of an entity include the carrying amount of goodwill relating to the entity or investment sold. Goodwill that was previously directly written off to reserves under UK GAAP is not included in the gain or loss on disposal of an entity Expenditure on new or substantially improved products is capitalised as an intangible asset and amortised over the expected useful life of the product concerned. Capitalisation commences from the point at which the technical feasibility and commercial viability of the product can be demonstrated and the Group is satisfied that it is probable that future economic benefits will result from the product once completed. Capitalisation ceases when the product is ready for launch. Internally developed intangible assets are systematically amortised over their useful economic lives which range from three to five years on a straight line basis. Expenditure on research activities and on development activities which do not meet the above criteria is charged to the income statement as incurred. Other intangible assets are systematically amortised on a straight line basis over their useful economic lives which are as follows:Computer software - 3 to 5 years Other intangible assets are systematically amortised on a straight line basis over their useful economic lives which are as follows: Other acquired intangibles - 5 to 15 years Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less cost to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash flows (cash generating units, ‘CGUs’). Where assets do not generate independent cash flows and their carrying value cannot be attributed to a particular CGU, CGUs are grouped together at the level at which these assets reside, and the carrying amount of this group of CGUs is compared to the recoverable amount of that particular group. All property, plant and equipment is stated at historical cost less depreciation and includes expenditure directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefit will flow to the Group and the cost of the item can be measured reliably. Depreciation is calculated on a straight line basis so as to write down the assets to their residual values over their expected useful lives: Freehold buildings - Normally 50 years Depreciation is calculated on a straight line basis so as to write down the assets to their residual values over their expected useful lives: Computer systems equipment, office equipment and motor vehicles - 2 to 5 years This category includes financial assets held for trading and those designated at fair value through profit and loss at inception. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management. Derivatives are also classified as held for trading unless they are designated as hedges. Assets in this category are initially recognised at fair value and subsequently remeasured at fair value. Realised and unrealised gains and losses are included in the income statement in the period in which they arise. Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group’s management has the positive intention and ability to hold to maturity. Assets in this category are initially recognised at fair value and subsequently measured at amortised cost. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market; they are included in trade and other receivables in the balance sheet. Assets in this category are initially recognised at fair value and subsequently measured at amortised cost. The Group has classified all of its marketable securities as available-for-sale. Assets in this category are initially recognised at fair value and subsequently remeasured at fair value. Unrealised gains and losses arising from changes in fair value are recognised in the statement of recognised income and expense. The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or group of financial assets is impaired. On disposal or impairment of the investment, gains or losses in equity are recycled through the income statement. Cash and cash equivalents include cash in hand, bank deposits repayable on demand, other highly liquid investments with original maturities of three months or less, and bank overdrafts. Inventories are valued at the lower of cost and net realisable value less progress payments received and receivable from the client. Cost is calculated on First-In-First-Out basis by reference to the invoice value of supplies and attributable costs of bringing inventories to their present location and condition. Net realisable value is the estimated market value less selling costs. Contract work in progress is valued at the lower of cost and net realisable value less progress payments received and receivable from the client. Cost is calculated on First-In-First-Out basis by reference to the invoice value of supplies and attributable costs of bringing inventories to their present location and condition. Net realisable value is the estimated market value less selling costs. Trade receivables are initially recognised at fair value and subsequently measured at amortised cost. Trade receivables do not carry interest and are stated at their nominal value, as reduced by appropriate allowances for estimated irrecoverable amounts. A provision for impairment of trade receivables is established when there is evidence that the Group will not be able to collect all amounts due according to the original terms of these receivables. The amount of the provision is the difference between the carrying value and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the income statement. Provisions, other than in respect of pension and post-retirement healthcare benefits, are recognised when the Group has a present legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount can be reliably estimated. Restructuring provisions comprise lease termination liabilities, employee termination payments and other liabilities incurred as part of restructuring programmes. Provisions are not recognised for future operating losses. Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Operating lease rentals are charged against profit on a straight line basis over the period of the lease. Operating lease incentives received are initially deferred and then recognised over the full period of the lease. Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date. Borrowing costs on qualifying assets are expensed as incurred and not capitalised as part of the cost of the asset. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either: hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); hedges of highly probable forecast transactions (cash flow hedges); or hedges of net investments in foreign operations. Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The effective portion of changes in the fair value of derivatives that are designated and qualify as hedges is recognised in equity. The gain or loss relating to the ineffective portion is recognised immediately in the income statement. Amounts accumulated in equity are recycled to the income statement in the periods when the hedged item will affect profit and loss (for instance when the forecast sale that is hedged takes place). However, when the forecast transaction that is hedged results in the recognition of a non-financial asset (for example, project costs or a major business investment) or a liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement. Hedges for net investments in foreign operations are through derivatives and foreign currency borrowings. Any gain or loss on a derivative hedging instrument relating to the effective portion of the hedge is recognised in equity; the gain or loss relating to the ineffective portion of the hedge is recognised immediately in the income statement. Any gains or losses on foreign currency borrowings used as a hedge are recognised in equity. Gains and losses accumulated in equity are included in the income statement on disposal or impairment of the foreign operation. The fair value of financial instruments traded in active markets (such as available-for-sale securities) is based on quoted market prices at the balance sheet date. The fair value of foreign exchange contracts is determined using forward exchange market rates at the balance sheet date. Other financial instruments are valued using standard pricing models based on quoted forward market rates, interpolated between dates where appropriate, and discounted cash flow techniques. Dividend distributions are recognised as a liability in the period in which the dividends are approved by the company’s shareholders. Interim dividends are recognised when they are paid; final dividends when authorised in general meeting by shareholders. The taxation expense for the year comprises current and deferred taxation. Taxation is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. The current taxation expense is based on the results for the year as adjusted for items that are not taxable or not deductible. Current taxation is calculated using taxation rates and laws that have been enacted or substantively enacted at the balance sheet date. Deferred taxation liabilities are generally recognised for all taxable temporary differences. Deferred taxation liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, associates and joint ventures except where the reversal of the temporary difference can be controlled and it is probable that the difference will not reverse in the foreseeable future. Deferred taxation assets are recognised to the extent it is probable that taxable profits will be available against which the deductible temporary differences can be utilised. The carrying amount of deferred taxation assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. A business segment is a group of assets and operations engaged in providing products and services that are subject to risks and returns that are different from those in other business segments. A geographical segment is a different economic environment in which an entity operates. Business segmentation is the primary reporting dimension for the Group, with geographical segmentation being the secondary reporting dimension. Accordingly, the four business divisions (i.e. Sales & Trading, Research & Asset Management, Enterprise and Media) are the primary reporting segments for the Group.