AstraZeneca PLC (AZN) 2004 Q2 法說會逐字稿

Good day ladies and gentlemen and welcome to IFRS Conference Call. For your information today's conference is being recorded. At this time, I would like to turn the floor over to your host for today, Dr. Mike Rand, please go ahead sir.

Thank you. Good afternoon ladies and gentlemen. Welcome to the AstraZeneca teleconference -- publication of our full year 2003 first half -- international. On the call today we are joined by John Symonds, our Chief Financial Office, and by Tim Watson (phonetic) Group Financial Consultant. Tim will take you through our presentation today. Before I turn the call over to Tim, I would like to read the Safe Harbor statement. The Company intends to use the Safe Harbor provision the United States Private Securities Litigation Reform Act of 1995. Participants on this call, may make forward-looking statements with respect to the operations and the financial performance of AstraZeneca. By their very nature, forward-looking statements involve risks and uncertainties, and results may differ materially from that expressed or implied by these forward-looking statements. The Company undertakes no obligation to update forward-looking statements.

Now let me handover to Tim Watson (phonetic), Tim?

Thanks Mike, and good afternoon to everyone. Starting with the background on slide number 1, the European Union requires 7000 of the listed companies in the EU to move their financial reporting to international accounting standards in 2005. First, our first former IAS announcement to be the first quarter results in 2005. We've decided to restate both 2004 and 2003, as these would be required for our U.S. reporting at the end of 2005.

I would like to draw your attention to the detailed information, which has been published on the AstraZeneca.com website this morning. This includes an explanation of the current status of the various standards and proposed amendments together with the assumptions that we have made of the most significant effects on AstraZeneca.

A revised set of accounting policies based on our assumptions about the standards and these will be our formal policies for 2005 reporting, once the standards are endorsed. The new financial statements covering all four quarters of 2003 and the first two quarters in 2004; reconciliations of the differences between the U.K. GAAP financial statements and the new IFRS statements; and finally, KPMG's opinion on the 2003 restatement, which is unqualified based on the assumptions we have made.

Turning to slide 3, most of you are probably well aware that the developments of the EU endorsed standards has not been an easy journey and it's still not complete. We have therefore had to make some assumptions and may have to revise these in due course. Although we don't believe any resultant changes to the numbers would be material.

On the positive side, the EU has endorsed the international accounting standards in issue as at July 2003, with the exception of IAS32 and IAS39, which are related to the disclosure and accounting of financial instruments.

However, the IASB has published provisions to many of these existing standards as well as five new standards known as International Financial Reporting Standards. But at this stage, only the original IFRS1 dealing with the transition to international standards has been endorsed by the EU. Even IFRS1, however, has had subsequent changes to detail, which needs to be rectified. Most of the changes in these times are straight forward and should be endorsed by the end of the year, but there are a few areas which are proving more contentious, in particular, IAS39 financial instruments, IAS19 employee benefits, and IFRS2 share based payments.

I will deal with our assumptions on these, as I go through the key areas that affect AstraZeneca. In general, the transitional arrangements require companies to apply the new policies retrospectively; but there are a few specific optional0 exceptions to this principle. We have applied all the new standard retrospectively, with one exception business combinations IFRS3, but we have chosen not to undertake and restate the merger of Astra and Zeneca.

Let's move on to discuss the financial impact that we are seeing. To keep it simple for the moment, I'll concentrate on the changes to 2003, but I will come back to 2004 at the end. You can see on slide 4, as we have previously flagged, the net changes to 2003 are not that large with a reduction of $104 million in operating profit, but after interest in tax, this is reduced to only $22 million, an EPS reduction of 2 cents. The movement in net asset is also small, of less than half of 1% of net assets.

There are 6 areas, shown on the 5th slide, for international standards have or could have a significant effect on AstraZeneca's financial statements. These are share based payments by IFRS2, pension and another employee benefits IAS19, business combinations and goodwill IFRS3, intangible assets IAS38, financial instruments IAS39; and deferred tax IAS12.

And let's now take each of these in turn starting with share based payments. IFRS2 requires companies to recognize the fair value cost of options as a P&L charge. We have gone with a transitional option that allows us to apply this standard [inaudible] retrospectively. We can do this because we have previously disclosed information relating to the fair value of options granted including the 2003 charge of $154 million on the U.S GAAP. We've used [spot] shows to calculate the option values. For pensions IAS19 is very similar to IFRS17 in its approach to the regular P&L charge, which is to split the cost between operating profit and interest.

For AstraZeneca, the overall P&L charge in 2003 is $21 million higher than the previous [SAP] [inaudible] charge. The IASP has issued some proposed changes, which if adopted will allow actuarial gains and losses to be taken direct to reserves, which is equivalent to the treatment required under IFRS17. We've assumed that this treatment will be allowed as an option and our restatements are prepared on this basis. If not allowed we will adopt the existing IAS19 although this would result in no change to the 20003 or 2004 P&L charge.

The impact on the balance sheet due to IAS19 at the end of 2003 is to bring in a pre-tax liability of $1.5 billion. This is a little higher than previously disclosed under IFRS17 as we've carried out some more comprehensive review and audit to include all of the groups' employee benefit funds.

Turning to goodwill, IFRS3 prohibits merger accounting [accruing] of interest and also the amortization of goodwill. However, as I said earlier, the transitional arrangements allow us the option of not applying acquisition accounting retrospectively, so we have chosen this option rather than rework the AstraZeneca merger. We have therefore, frozen at 1st January 2003 all goodwill arising from earlier business combinations and eliminated $59 million of goodwill amortization from the 2003 P&L.

Moving on to intangible assets; IAS38 requires the capitalization of internal R&D when certain criteria are met, for example probable future economic benefits. We have taken the view we believe in common with the rest of the European pharma industry that we will rarely if ever be able to meet these criteria for internal R&D expenditure and so we have continued to expend such costs.

However, we have identified previous IT spend which meets the criteria and have capitalized $43 million of IT development costs, which were previously expensed in 2003. The standard also requires all externally purchased intangibles to be capitalized and a few small early stage compounds, which were acquired in 2003, are now been capitalized rather than expensed as they were on the U.K. GAAP. The net impact on 2003 profits from these various changes is only a $3 million increase. While we were evaluating the impact of IAS38, we looked at activities currently classified as R&D, which take place in all local companies. We came to conclusion that some of these will be better classified as SG&A. Examples, include small local commercialization studies, regulatory affairs, provision of medical information, drug safety monitoring, and so. In 2003 we have reclassified $460 million out of R&D and into SG&A and we believe this brings us into line with practice elsewhere in the industry.

Now for IAS39; despite the controversy we would not normally expect IAS39, which deals with financial instruments to affect us greatly. Although there will always be some volatility due to marking financial assets and liabilities to fair value, we have based our IFRS financial information on the so called EU carve version of IAS39. The main balance sheet impact is the adjustment from cost of fair value of short-term investments and interest rate and currency derivatives as a consequence that the P&L impact is essentially to bring forward the recognition of any gains or losses arising from these instruments. The P&L difference in 2003 is a $21 million reduction to the profit before-tax level caused mainly by a modest fall during 2003 and the fair value of our derivative portfolio.

The final change I'll highlight is the tax issue as a result of IAS12 and relates to the deferred tax rate to be applied, whether eliminating internal profits made on inventory transfers between subsidiaries. The impact from 2003's tax charge is a reduction of $82 million.

That deals with 2003. For 2004 you can assume that the P&$ impact arising from most of these new standards, will be broadly similar. However, by its nature, IAS39 is less predictable and you can see in the detailed reconciliations, that for the first half of 2004 IAS profits of $101 million lower than U.K. GAAP, considerably greater than the $21 million adjustment in 2003. A significant part of 2004 adjustments relates to the currency hedging gains, we have been telling you about in our U.K. GAAP quarterly announcements. This is caused by the earlier recognition of profits under IAS through fair value adjustments. In the second half of 2004, we expect reduction similar to the first half as we move from U.K. GAAP to IFRS.

Finally, we are aware of some concerns about what performance measures will be relevant in the future. Our view is, that if we got the assumptions above [rate], international standards do not fundamentally change our accounting and therefore earnings per share will remain a core short-term measure. You may want from time-to-time to strip out volatility caused by IAS39, but it is unlikely that this will be any worse than volatility we currently experience on the U.K. GAAP in recording financial gains and losses as they are realized.

We have also been asked whether to adjust for amortization of intangible assets. We believe that intangible assets are income generating in just the same way as tangible assets, better manufacturing plans. And therefore, an amortization or depreciation charge over the useful life of intangible assets is appropriate and should be probably not routinely be stripped out.

I hope that you have this found brief summary helpful. I will now be happy to take any questions, which you may have.

Thank you. Ladies and gentlemen, to ask a question in today's conference, please press "*" "1" on your telephone keypad. If you have a telephone with a mute function, please ensure that your mute function is turned off to allow your question and signal to reach our equipment. Once again, ladies and gentlemen, please press "*" "1" to ask a question.

Our first question comes from Jo Walton of Lehman Brothers. Please go ahead.

Three questions, please. Firstly, I have to make -- just trying to understand pension accounting -- could you just tell us briefly why the pension adjustments IAS19, is such a small amount, whereas the FRS17 adjustments, if you look at your 2003 accounts is much bigger amount. So, just one thing, RFS17, will essentially what was going to be used going forward, but clearly, that is not the case. Secondly, if we look at intangibles IAS38, you see an additional amortization of $51 million added on slide 9, plus an amount that would be about that level going forward, so then effectively, what you have lost in goodwill amortization, you have regained in terms of intangible assets, amortization, because 59 is fairly close to a 51? And finally, you talk about the costs -- the addition of 100 odd million in the first half and also being seen in the second half in terms of the financial instruments. While, I am sure that, John Symonds knew that and impact in -- taken into account when looking at the expectations for financial income for 2004 or will that be an additional expense over and above what would have been expected?

[inaudible] wasn't quite sure we have done -- IAS19 being small because the net assets --

Sorry, the operating profit.

We've got -- we had a RFS17 charge disclosed, but [298], that is 272 under [SAP54].

Alright.

I mean what we have attempted is really on IAS19, Jo, to -- and you can see from the assumption that we've may and that we are assuming that the -- exemption is currently going through the International Accounting Standards, -- that we will be able to help adopt FRS17and so -- these numbers clearly get being refined as part of the process of restatement, you should essentially look at them as -- being RFS17 and all principle [respect] as far as to our IAS19.

Okay.

Turning to amortization going forward [Tim]?

Yes, I think we would see the intangible amortization going forward is broadly the same as what you are seeing in the reconciliations.

[inaudible] is generally it's quite too. so, we should be looking at a capitalization period around -- of around 5 years, sometimes a bit less. But compare to what you capitalize here in [inaudible] previously [inaudible] the amortization.

And on the third point, yes, I was fully aware that with 100 million of -- or so of gain coming in the second half and they are fully [factored] into our guidance and as Symonds said when you look at the -- IFRS restatement for the full year, it probably back out about another 100 million

Can I just ask the acquisition of the product rights; roughly how much money had been expensed through the P&L that you have now capitalized and turnaround to the amortization charge. Give us some idea of the length time in amortization. I'm really looking at the acquisition not the internal development?

You're talking about 18 on the slide 9?

Yes.

I think --

And the expense that would have gone through the R&D line presumably?

Yes, and we will now be amortizing at over the life of the product acquired, because that could be well be 10 years.

So, do I assume, it's a couple of 100 million dollars that went through the P&L --

No.

wouldn't -- no?

Actually for those Jo, I think we haven't, because we will the start amortization when the product is launched. We haven't actually expensed anything for those items.

Okay. Well the question still stands then roughly how much R&D wouldn't have been there on to the new accounting and -- that is separate from the $467 million reclassification?

We expensed the 18 million on that side when we acquired those products. What I am saying is that we haven't started under IFRS charging --

Yeah, no, that's not the amortization, Jo, I see where you are coming from. That was the full cost of product the rights that we've fully expensed. Generally, if you are taking a product license or a product acquisition in the early stage of development we had always -- we have always written that off as we incurred in this year. And in 2003, I think there was three small deals where expenses were added out to 18 without being added back.

[inaudible]

So, that's not amortization, that's full cost.

Thank you. I understand that.

Okay.

Thanks Jo.

Next question please.

Thank you. Our next question comes from David Beatle (phonetic) of UBS, Please go ahead.

Hi, good afternoon gentlemen. I am just wondering I am not fully aware whether that show actual [inaudible] were both allowed or recommended [inaudible] I thought I should say, I just wondered whether there is any significant impact [inaudible] -- or what you calculate the [inaudible]?

We had a look at that those and come to conclusion that there isn't a huge difference between the two. That said, it's quite hard at the moment to find [inaudible] which are really available and subject to [inaudible] so we [inaudible] just come back and I think we are seeing this from a number of our peers to focusing on that show [inaudible] for the time being. As more -- binomial solutions [inaudible] we will have a look at those and but I wouldn't expect much difference.

Okay thanks.

Next question please.

Thank you. Our next question comes from -- ladies and gentlemen, once again to ask a question please press "*", "1". We will now take our next question from [inaudible]. Thank you.

Yes gentlemen good afternoon. Two questions, if I may, but the first, is just how you see the options expense moving going forward whether one should expect that the use of share option by AstraZeneca is going to become less frequent and that what charge -- to manage certainly what appears to be the case through the first half of 2004 relative to last year. And secondly, I wondered whether and if you would to make a large acquisitions, your comments on the amortization of intangible assets would hold through, and you had allocated the significant process of [inaudible] goodwill to product license etcetera -- would you expect us to rely on an earnings [inaudible] may indeed turnout to be negative throughout the [inaudible] -- large add back for intangibles?

Okay -- I mean on the first one, I mean I think this is one of the interesting aspects that bringing share based payment in some of these other standards and it's not an accounting recognized; it's also valued for money -- and as if you are going to spend 154 million on option it's not the best use -- of the Company's money and we will achieve [inaudible] you intended in the first place.

I think we are not yet ready to change our view on this, therefore, I would assume that the same sort of charge is there going forward. But I think we like many other companies are now looking at the value we get from the share option program. On the amortization question, I mean -- you know, in a sense, you can't have an answer on -- in a small case; it doesn't reside on a larger scale. I think the comments that Tim made reflected our views in today’s world and there is not much of a distinction between an impact as a valued intangible asset and a valued tangible asset, where the accounting rules are the same for both; and if allocate that cost to the P&L, in a way that’s represents -- its huge. I think its hard to argue, that if you make a big acquisition and have those intangible assets valued; fair valued then the amortization reflects all of those costs being charged to those assets in use. I think increasingly you know, we will be separating [inaudible] cost and largely it would be up to you to choose, do you want to an accounting based measure of earnings, for the basis of evaluation or do you want the cash base, measure of earnings. But I think the accounting exercise is intended to try and allocate those costs in a way that it [serves] the P&L. I can't fully answer your question, because I would rather [suspect] that some of you will look it on a fully amortized basis, and another's will added it back and look at it on a different basis in terms of [systemic changes]. You know its your choice but I think we will certainly, on a large scale you know want to put some quality around the amortization number in the P&L.

Okay. Thank for that. One follow-up if I may, and that’s just getting back to IAS39 financial instrument, how are we to have any idea at all at your exposure at any -- at a year ago it started to be here on [inaudible] cost [inaudible] one major try. I mean it only sounds possibly that you try determining you know what the maneuver in that particular line maybe for the December item we should be ineffectively ignoring in your U.K guidance throughout, which is not effective [inaudible]?

I think it’s a very good question and I think one that will be raised a lot over the coming months as people get to see you know, what volatility can be introduced into financial statements around financial items. I think the obvious question -- I mean because at the beginning of the year, when we gave our earnings guidance, it is very difficult to forecast a future change in market value or future impairment. Therefore our are guidance is largely based with currently into exchange rates and that’s based on our current assumptions. I think in some cases, you will need to ask more questions about what [inaudible] in the balance sheet can give rise to volatility and there you will need to look at the marketable securities and in the balance sheet and maybe as what you talked earlier that maybe a derivative of portfolios which, when you get into the back of financial statements, we are already there in rather more detail than many people will need. And in fact, in anticipation of this, you are probably aware that we changed our hedging policy at the beginning of this year. So you can have significantly less derivatives than to go for other forms of currency protection that gives us less volatility. So, I would expect, on the currency side we need to provide you with sort of the guidance we do every quarter. I think where you find the volatility around marketed security directly I think you probably should be asking more questions as to what lies in the balance sheet.

Okay. Thank you.

Thank you. Our next question comes from Ben Yeoh (phonetic) of ABN Amro, please go ahead.

Hello its Ben Yeoh from ABN Amro. I was wondering how these new rules are going to affect the decision making process by management or middle management that is, what sort of difference [its going to] make running your business. I assume you have the license that you might be taking it little bit differently [inaudible]. But I guess [inaudible] itself maybe like on [inaudible]. I guess on that one as well I hope, are you going to get much more [inaudible] from the stock option [inaudible]?

I mean I have been saying for quite some time that with my other hat on as a hundred [inaudible] that this is not an exercise in technical accounting. It is of course, but it actually had wider implications in terms of decision making as well as behavior. In our licensing and acquisition discussions there over the last 18 months we have been factoring into, and taking into account intangible capitalization to make sure that this is deal that we would present as good one and all forms of accounting. So you know, we have been trying to take -- we have been taking that into account for some time. But I think many people have only really just begun to recognize that there are two other very significant dimensions around decision making and behavior. We have trained internally, probably about a 1000 people on the basic principles of international accounting standards, those in the financial community clearly need some in-depth training about senior managers, deal makers, people in both in product licensing and product acquisitions also need to understand the nature of things that they are handling. So that they definitely take decisions as to say with a good under the new accounting basis as it was on to the old. You were saying more volatility in --

I guess I was hinting towards how we are self-compliant to calculate the impact of [inaudible]. I mean you have the assumption that you [will view] actual in your reported account that [inaudible] already on the [inaudible] assumptions and try and get the [inaudible] in that?

I think one of the aspects that will diminish the volatility before time is the fact that we have to [spread] being those of the resting period. So that we won't attempt to do now any sudden movement in the one year, and there is a -- on the side which is to say that the tax, deferred tax or charge credit of these is not directly linked to the share [inaudible] charge so that it also takes into account the market value as of the date at exercise or what we would have to [openings] to assume the period end market value is a surrogate for that exercise price. So the tax charge or credit on these can move in a different way to that charge or so.

Okay.

And if you looked at the detailed analysis its on the page 118 of [20F], your key assumption is being shared by accounting. The principle one being dividend yield to risk free rate of interest and expected volatility [inaudible] that has declined in 2004 compared to 2003, which continued to have pushed the charge down in 2004. But those are the sorts of things that we you get at. But as Tim said, you know if somebody impacts his lesson because of the way you are spreading moving forward.

Right. And, just coming back to that one about the decision making [inaudible]. So you were saying if you trained for a lot of your non-financial decision making [inaudible] to be around so you would be saying that in terms of your licensing decision that -- this is something that you are now already taking into account. Are there any other key behaviors I don’t know, I guess sense as that what [inaudible] might be such a big [inaudible]?

I think for two -- the two main areas in decision making are the sort of licensing for our acquisition area and honestly you know we thought long and hard about how to hedge in IAS39 I think why did say we are taking out, maybe [inaudible] we used to [choose] because hey I think we are very comfortable communicating to you on a pre-imposed effective currency volatility and we believe that there are other instruments that we can use that take out some of the worst extremes of currency volatility without having to face every kind of hedging there.

The behavior is there really around share based payments and I think pension. I think having pension liability on the balance sheet particularly if you are on an organization that has got a credit rating to manage I think you will start to think pretty hard about how you managed those liabilities. Btu I think you also ought to be, we ought to be clear in the sense that the whole concept of international accounting standard is really that the main difference is about how you recognize the timing of which you recognize profits and losses it doesn’t affect cash flow. So irrespective of IAS a bad deal and a bad licensing deal under the old standards it is probably a bad deal under this because we failed to forecast the cash flows properly. So it's all about recognition, it doesn’t -- it doesn’t fundamentally change the economic decision, but the presentation difference these are something that we would need to communicate to you, if from the face of it didn’t look like a good deal to you.

Okay thank you.

Okay.

Thank you. We will now take our next question from Kevin Wilson of Citigroup. Please go ahead.

Thanks very much. Two questions if I may, the first on the tax rate going forward and historically your guidance in between [7%]. So your calculation is that [inaudible] four I believe restated as [inaudible] the underlying tax rate for our going forward for our initial marketing purposes. And the second question relates to the allocation of [inaudible] files to SG&A. Can you give us a flavor of what proportion of your [inaudible]?

Can you just say that last piece again?

It was a question of what proportion of your [effective] cost has been allocated to SG&A [inaudible]?

I don’t the answer. You have got one [Ed]

Somebody maybe, I think on tax I don’t think at this point we are changing our forward guidance on tax so to see between the answer to the earlier question and we have in fact joining in some of IAS the consequences into our future tax rate guidance. So either I would stake [pick the 27] patients where held these sides. Do you have any idea of the precaution of [phase 4] cost?

Well, it's certainly a high proportion of the [phase 4] activities that are taking place in our local companies. Things like outcomes that is which are driven by the closer R&D function and perhaps that we made in R&D.

Basically the distinction is between you know something that speaks against a local label change or local marketing benefit as opposed something that we would be a major indication that we have rolling out around the globe. The latter were improving the category of global R&D and the local stuff is what we are dealing with here and obviously our big programs are a mix of two.

Yeah. Thanks.

Thank you, we will now take our next question from Frank Major (phonetic) of Redford Stock (phonetic). Please go ahead.

Thanks another question relating to the reclassification of R&D. Looking at your numbers on the U.K GAAP, I mean your SG&A and R&D as a percentage of sales on that [different] [inaudible]. And the size of the reclassification I think is quite substantial. So I was wondering if could [inaudible] out a little bit your comment do you think what you have done is in line with industry practice perhaps give us some idea of what proportion of your [inaudible] actually accounts [spacing] and why that you [inaudible] going forward? Thank you.

I think there has been a very useful additional benefit certainly from your perspective. There has been quite a lot of dialog around the industry, not just between ourselves and GFK, but across the European side. Thus should I think, we are now pretty comfortable with the certainly the definitions that we are now using as sort of more widely adopted across Europe. And so I think, we are comfortable with where -- with the answer that we have left and I think you know, it is up to, to you to draw the comparisons as to where we stand relative to others. And I think, what you can take from here is that you have the definition of -- our definition of R&D here encompasses, drug discovery, all the principle clinical phases of R&D and global post-launch programs where we are seeking major new indication.

I think, I would add that you can see that the impact is actually as small one. Its in the first half of 2004, proportionately and we are seeing in 2003, our Phase IV activity locally around next year in [inaudible] get quite a high raise.

Okay, would you say then that what we are seeing for the first half of 2004, is a proportion of more representative of how we would adjust going forward then?

Well, I think, we have got to be careful to draw any conclusion -- any too hard conclusions from there. I mean one of the reasons in our broader financial disclosure to you, is that we have aggregated R&D and SG&A because you know there's a degree of discretion as to whether you do a local clinical Phase IV trial or you do a different form of local product promotion. So I think it will always be down to the people that are responsible for delivering product in market. Decide what the optimal mix will be an on occasions, if they all decide to do it by a local trial and other markets may well decide to do it a different mix. So you know I wouldn't get -- I wouldn’t try and read too much into this one element.

Okay, thank you.

Thank you. Our next question comes from Peter Cartwright of Williams de Broe, please go ahead.

Yes, thank you. I think you have largely answered it already, despite on the currency hedge. If you are for example a large exporter from Europe to North America, seeking to cover say five years transactions in dollars. Are you indicating that if you had done it by say forward sales, there is no impact if it all [durative] instruments, you could be taking five years worth of volatility during the first year?

Yes, I mean that’s the implication of some of the mark-to-market. You know there is a lot of people that would say well actually what Enron was doing was consistent. If there is a market based valuation over a long period of time and it can be possibly observed in the value of sense, then you can't get advance recognition of profits on [inaudible] and the reverse applies too. But I think forward sales where they have done it contractively you know there is no change is being missed.

Right yes, say a large exporter like say a German car company into North America, if that was all derivatives and the volatility increased and price annual profit, if given the scale of those contracts and the possible time duration?

Yeah. I mean there is plenty -- there is plenty of things that you can expect to or speculate upon that Peter.

Yeah. Fine thank you very much

Thank you. Our next question comes from Robert Gilbert (phonetic) of Numus (phonetic). Please go ahead.

Hi. It's Robin Gilbert. Hi, how do you see the changes eventually tying up with U.S. GAAP operations?

Oh yeah. I mean that's the big question and for many us. You know we definitely don't look at what we are discussing today and anything other than the beginning of a journey, certainly not the end. Unfortunately you can say well this has been pretty difficult so far, when in reality actually we have been dealing with the some of the more straight forward differences between European accounting or in U.S. GAAP. I think there are still plenty of differences around pension accounting, [business] combination, and so on. As well as tackling things like performance reporting and indeed I don't think anybody would take IAS39 as being remotely close to the final stage. So I think there are clear commitments from the IASB and the FASB in U.S. to actually eliminate the reconciliation between U.S and international accounting standards. But I think it's probably a little further away than most people can appreciate.

Just for a moment is an official time that we will hear or not?

No there isn’t it but I think you know informally people would suggest '08, '09, five years from here but, I am not sure that what we have seen on share based payments yet far [inaudible] with a great deal of enthusiasm whether it's going to happen last [inaudible].

Okay.

Okay well that's the last question, if there are no there are no further questions if I could thank everybody for joining in. Obviously there is quiet a lot for you to digest. I hope we have been as clear and as transparent on this as you would want to us to be. But if there are any further questions that come to you, our investor relations team as well as better experts on this than me, are available to answer your questions. But thank you again very much for your time and your interest.

Ladies and gentlemen, that will conclude today's conference. Thank you for your participation.