8-K

CRH PUBLIC LTD CO 8-K Report (Jun 1, 2005)

Filed June 1, 2005For Securities:CRH

Summary

CRH Public Limited Company (CRH) has filed an 8-K report detailing the impact of its transition to International Financial Reporting Standards (IFRS) on its 2004 financial results. Previously prepared under Irish GAAP, the company's financial statements for periods beginning January 1, 2005, will now adhere to IFRS. The transition resulted in several key adjustments, notably a significant increase in reported profit before tax and profit after tax due to the non-amortisation of goodwill under IFRS, which was previously amortised under Irish GAAP. This change increased profit before tax by 9% and profit after tax by 13% for 2004. Basic Earnings Per Share (EPS) also saw an increase of 14%. However, Total Equity decreased by 6% due to the inclusion of pension and deferred tax assets and liabilities under IFRS, and Net Debt increased by 13% due to the inclusion of a share of joint ventures' net debt.

Key Highlights

  • 1CRH is transitioning its financial reporting from Irish GAAP to IFRS, effective for periods beginning January 1, 2005.
  • 2IFRS adoption leads to a significant increase in reported profit before tax (+9%) and profit after tax (+13%) for 2004, primarily due to the non-amortisation of goodwill.
  • 3Basic Earnings Per Share (EPS) increased by 14% under IFRS compared to Irish GAAP for 2004.
  • 4Total Equity decreased by 6% under IFRS, largely due to the accounting treatment of pension and deferred tax items.
  • 5Net Debt increased by 13% under IFRS, primarily from the inclusion of joint venture net debt.
  • 6The transition involved adopting various IFRS standards including IFRS 2 (Share-based payments), IFRS 3/IAS 38 (Business Combinations/Intangible Assets), IAS 12 (Income Taxes), IAS 19 (Employee Benefits), and IAS 31 (Interests in Joint Ventures).

Frequently Asked Questions

The most significant impact stems from the non-amortisation of goodwill under IFRS. Previously, CRH amortised goodwill under Irish GAAP, which reduced reported profits. Under IFRS, goodwill is tested for impairment annually rather than amortised, leading to higher reported profits before tax and after tax.

Total Equity is reported as 6% lower under IFRS primarily due to the recognition of pension and deferred tax assets and liabilities. Conversely, Net Debt is reported as 13% higher, largely due to the proportionate consolidation of joint ventures' net debt under IFRS, which was not fully reflected in the same manner under Irish GAAP.

The restatement primarily impacts the presentation and accounting of past results. While the non-amortisation of goodwill increases current reported profits, the underlying operational performance and future earnings potential are driven by the company's business activities. Investors should focus on the operational changes and future guidance rather than solely on the IFRS-driven accounting adjustments for goodwill.

The most impactful standards included IFRS 3/IAS 38 (Business Combinations and Intangible Assets), particularly the cessation of goodwill amortization. IAS 12 (Income Taxes) also introduced changes through the recognition of deferred tax on temporary differences. IAS 19 (Employee Benefits) affected the balance sheet through pension scheme accounting, and IAS 31 (Interests in Joint Ventures) led to the proportionate consolidation of joint venture assets and liabilities.