The profit figures of UK pharmaceutical giant Glaxo Wellcome have been slashed by its use of US accounting rules, it has emerged.
Around #800m has been wiped off Glaxo’s #1.8bn UK post-tax profit by a conversion to US generally accepted accounting standards, an adjustment shown at the back of the group’s annual report.
The huge difference arises mainly as a result of different rules for dealing with goodwill and intangible assets between the two countries.
Under US rules, goodwill and intangible assets are capitalised and amortised over their useful life, whereas in the UK they have historically been set against shareholder funds.
Glaxo has now changed its goodwill policy, however, and is hoping the differences will eventually disappear as a result.
The changes arise from the implementation of FRS10 on goodwill and intangible assets, which came into force in the UK last December.
In line with the new standard, Glaxo has begun capitalising goodwill and amortising intangible assets over their useful economic life. But it said significant differences between the UK and US figures would continue to exist until pre-1998 goodwill and intangible assets capitalised under US rules had been fully amortised.
Glaxo is listed on stock exchanges in London, New York, Tokyo and Paris.
A spokesman said it was monitoring developments in international standards and anticipated moving to them once they became ‘the norm’.
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