Presentation of non-GAAP measures
BG Group gives certain additional information in a non-statutory
format in order to provide readers with an increased
insight into the underlying performance of the business.
The measures the Group uses are explained below.
Business Performance
‘Business Performance’ excludes disposals, certain re-measurements
and impairments (see below), and is presented in this
way as exclusion of these items provides a clear and
consistent presentation of the underlying operating performance
of the Group’s ongoing business.
BG Group uses commodity instruments to manage price exposures
associated with its marketing and optimisation activity
in the UK and USA. This activity enables the Group to
take advantage of commodity price movements. It is considered
more appropriate to include both unrealised and realised
gains and losses arising from the mark-to-market of derivatives
associated with this activity in ‘Business Performance’.
Disposals, certain re-measurements and impairments
BG Group’s commercial arrangements for marketing gas include
the use of long-term gas sales contracts. While the activity
surrounding these contracts involves the physical delivery
of gas, certain UK gas sales contracts are classified
as derivatives under the rules of International Accounting
Standard (IAS) 39, ‘Financial Instruments: Recognition
and Measurement’, issued by the IASB, and are required
to be measured at fair value at the balance sheet date.
Unrealised gains and losses on these contracts reflect
the comparison between current market gas prices and
the actual prices to be realised under the gas sales
contracts and are disclosed separately as ‘disposals,
re-measurements and impairments’.
BG Group also uses commodity instruments to manage certain
price exposures in respect of optimising the timing and
location of its physical gas and LNG commitments. These
instruments are also required to be measured at fair
value at the balance sheet date under IAS 39. However,
IAS 39 does not allow the matching of these fair values
to the economically hedged value of the related commodity,
resulting in unrealised movements in fair value being
recorded in the income statement. These movements in
fair value, together with any unrealised gains and losses
associated with discontinued hedge accounting relationships
that continue to represent economic hedges, are disclosed
separately as ‘disposals, re-measurements and impairments’.
BG Group also uses financial instruments, including derivatives,
to manage foreign exchange and interest rate exposure.
These instruments are required to be recognised at fair
value or amortised cost on the balance sheet in accordance
with IAS 39. Most of these instruments have been designated
either as hedges of foreign exchange movements associated
with the Group’s net investments in foreign operations,
or as hedges of interest rate risk. Where these instruments
cannot be designated as hedges under IAS 39, unrealised
movements in fair value are recorded in the income statement
and disclosed separately as ‘disposals, re-measurements
and impairments’.
Realised gains and losses relating to the instruments
referred to above are included in Business Performance.
This presentation best reflects the underlying performance
of the business since it distinguishes between the temporary
timing differences associated with re-measurements under
IAS 39 rules and actual realised gains and losses.
BG Group has also separately identified profits and losses
associated with the disposal of non-current assets and
impairments of non-current assets as they require separate
disclosure in order to provide a clearer understanding
of the results for the period. For a reconciliation between
the overall results and Business Performance and details
of disposals, re-measurements and impairments, see
note 2
and note 5.
Joint ventures and associates
Under IFRS, the results from jointly controlled entities
(joint ventures) and associates, accounted for under
the equity method, are required to be presented net of
finance costs and tax on the face of the income statement.
Given the relevance of these businesses within BG Group,
the results of joint ventures and associates are presented
before interest and tax, and after tax. This approach
provides additional information on the source of BG Group’s
operating profits. For a reconciliation between operating
profit and earnings, including and excluding the results
of joint ventures and associates, see
note 2.
Exchange rates and prices
BG Group also discloses certain information, as indicated,
at constant US$/UK£ exchange rates and upstream prices.
The presentation of results in this manner is intended
to provide additional information to explain further
the underlying trends in the business. The disclosure
re-calculates the current year profit on the basis that
the US$/UK£ exchange rate and the upstream commodity
prices were the same as in the previous year, providing
a comparable base in respect of these two factors.
Net borrowings/funds and return on average capital employed
BG Group provides an analysis of the amounts included
within net borrowings/funds as this is an important liquidity
measure for the Group.
Return on average capital employed (ROACE) represents
profit before tax (excluding disposals, re-measurements
and impairments) plus net interest payable on net borrowings,
as a percentage of average capital employed. Further
information on these measures is provided in the Five
year financial summary (unaudited) section.