GlaxoSmithKline - Presentation of financial statements

Description of business
GlaxoSmithKline is a major global healthcare group which is engaged in the creation and discovery, development, manufacture and marketing of pharmaceutical products, vaccines, over-the-counter (OTC) medicines and health-related consumer products. GlaxoSmithKline’s principal pharmaceutical products include medicines in the following therapeutic areas: central nervous system disorders, respiratory, anti-bacterials, anti-virals, metabolic and gastro-intestinal, vaccines, oncology and emesis, cardiovascular, arthritis and dermatologicals.

Financial period
These accounts cover the financial year from 1st January to 31st December 2000, with comparative figures for the financial years from 1st January to 31st December 1999 and 1st January to 31st December 1998.

Composition of the Group
A list of the subsidiary and associated undertakings which, in the opinion of the Directors, principally affected the amount of profit or the net assets of the Group is given within the Group companies section.

Composition of financial statements
The consolidated financial statements are drawn up in accordance with UK generally accepted accounting principles (UK GAAP) and with UK accounting presentation.

The financial statements comprise:


•	Consolidated statement of profit and loss
•	Consolidated statement of total recognised gains and losses
•	Consolidated statement of cash flow
•	Consolidated balance sheet
•	Reconciliation of movements in equity shareholders’ funds
•	Company balance sheet
•	Notes to the financial statements.

As permitted by Section 230 of the Companies Act 1985, the profit and loss account of the company is not presented.

The statement of total recognised gains and losses comprises:


•	the realised profit attributable to shareholders as reflected in the consolidated profit and loss account
•	the unrealised gain or loss in the value of the company’s overseas net assets, less related foreign currency borrowings, attributable to currency movements over the period.

The reconciliation of movements in equity shareholders’ funds comprises the items contributing to the increase or decrease over the period in shareholders’ funds. Such items include:


•	the total recognised gains and losses for the period
•	dividends paid and proposed
•	the proceeds of shares issued during the period
•	changes to goodwill, arising on acquisitions prior to 1st January 1998, which has been set directly against reserves.

Additional information in accordance with the requirements of US generally accepted accounting principles (US GAAP) is included in the notes to the financial statements. In Note 37 a statement of differences, and a reconciliation of net income and shareholders’ equity, between UK and US GAAP are provided, and the principal financial statements are presented in accordance with US GAAP and in a US GAAP format.

Merger of Glaxo Wellcome plc and SmithKline Beecham plc
GlaxoSmithKline plc acquired Glaxo Wellcome plc and SmithKline Beecham plc by way of a scheme of arrangement for the merger of the two companies which became effective on 27th December 2000.

Under UK GAAP the financial statements of GlaxoSmithKline plc for the period to 31st December 2000 have been prepared as a merger of Glaxo Wellcome plc and SmithKline Beecham plc. The results of Glaxo Wellcome plc and SmithKline Beecham plc are included for the year to 31st December 2000, with comparative figures on a similar basis for the years to 31st December 1999 and 31st December 1998.

Under US GAAP the financial statements of GlaxoSmithKline plc for the period to 31st December 2000 have been prepared as an acquisition of SmithKline Beecham plc by Glaxo Wellcome plc at 27th December 2000. Accordingly the results of SmithKline Beecham for all periods prior to that date are not consolidated.

Presentation of statement of profit and loss
A columnar presentation has been adopted in the statement of profit and loss in order to illustrate underlying business performance. For this purpose certain items are identified separately and are excluded from business performance. These comprise: merger items, including product divestments; costs relating to previously announced manufacturing and other restructurings; the effect of business disposals in prior years.

Trading profit reflects sales less: cost of sales, comprising costs of manufacture and external royalties; selling, general and administrative expenditure, comprising the costs of selling and medical support of currently marketed products and the costs of administration; the costs of research and development to create future products for sale.

Accounting convention
The financial statements have been prepared using the historical cost convention.

Accounting standards
The financial statements comply with all applicable UK accounting standards.

Accounting principles and policies
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the accounts and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The financial statements have been prepared in accordance with the company’s accounting policies described in Note 3. The company has implemented two new Financial Reporting Standards as described in Note 4.

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