Lloyds becomes latest bank to snub IFRS
The bank follows the example of fellow FTSE 100 incumbent HBOS, presenting its final results on an embedded value basis
Lloyds TSB has followed HBOS in snubbing international financial reporting
standards and publishing accounts under embedded value (EV) methods as well as
under the new and controversial rules.
Helen Weir, Lloyds’ FD, said the move would aid ‘clarity, transparency and
comparability of financial information’. Lloyds’ finance chief delivered the
rebuke in the banking giant’s report released this week.
Lloyds stated that under IFRS, Scottish Widows’ 2006 profit before tax,
excluding volatility, totalled £730m, whilst on an EV basis, 2006 profit before
tax, ‘excluding volatility and other non-recurring items’, was £852m.
Similarly, the value of the company on an EV basis at 31 December 2006 was
£6.4bn, £1bn higher than the IFRS calculation of £5.4bn.
The bank’s decision follows the example of fellow FTSE 100 incumbent HBOS
after it also presented its final results on an embedded value basis. At the
time analysts supported the group’s move, saying that the IFRS valuation methods
were ‘misleading.’
The full EV basis, unlike IFRS, recognises profits on new business at the
point of sale with the contribution from existing business only including
changes in the value of future cashflows compared to predictions.