Notes to the interim financial statements (continued)

Basis of preparation The financial statements have been prepared on the historical cost basis except that derivative financial instruments and financial investments held for trading or available for sale are stated at their fair value. Non-current assets held for sale are stated at the lower of carrying amount and realisable value less costs to sell. The accounting policies set out below have been applied consistently to all periods presented in these consolidated interim financial statements and in preparing an opening IFRS balance sheet at 1 January 2004 for the purposes of the transition to IFRS, other than in respect of IAS 32 and IAS 39 which, as allowed by IFRS 1, have been implemented from 1 January 2005.

Basis of consolidation The consolidated financial statements include the financial statements of the Company and its subsidiaries for the period. A subsidiary is an entity that is controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during a period are included in the consolidated financial statements from the date that control commences until the date that control ceases. In accordance with the transitional rules of IFRS 1, the Company has not restated business combinations that took place prior to 1 January 2004. As a consequence the Scheme of Arrangement entered into in 1998 whereby the Company acquired Elementis Holdings Limited and applied the true and fair override to account for the transaction as a merger has not been restated under IFRS.

Associates Associates are those entities in which the Group has significant influence, but not control over the financial and operating policies. The consolidated financial statements include the Group’s share of the results and net assets of associates on an equity accounted basis.Where the Group’s share of losses exceeds its investment in an associate, the Group’s carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred a legal or constructive obligation.

Foreign currency

a)

Foreign currency transactions Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction.Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities are translated using the exchange rate at the date of transaction.

Notes to the interim financial statements continues on the next page >
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