: notes to the accounts :
25. Acquisitions :
All acquisitions have been consolidated applying
acquisition accounting principles.
| all figures in £ millions |
1999
|
1998
|
|
total
|
total
|
|
| Acquisition analysis of subsidiaries and businesses | ||
| Tangible fixed assets |
(4)
|
143
|
| Stocks |
(2)
|
299
|
| Debtors |
9
|
311
|
| Current asset investments |
27
|
151
|
| Creditors |
(20)
|
(258)
|
| Provisions |
10
|
(86)
|
| Deferred taxation |
1
|
1
|
| Equity minority interests |
32
|
2
|
| Net borrowing acquired |
––
|
(2)
|
|
|
|
|
| Net assets acquired at fair value |
53
|
561
|
|
|
|
|
| Fair value of consideration: | ||
| Cash |
(267)
|
(2,918)
|
| Deferred cash consideration |
(4)
|
1
|
| Costs accrued |
(2)
|
(4)
|
| Net prior year adjustments |
33
|
(4)
|
|
|
|
|
| Total consideration |
(240)
|
(2,925)
|
|
|
|
|
| Goodwill arising |
187
|
2,364
|
|
|
|
|
| Analysed as: | ||
| Goodwill capitalised |
187
|
2,348
|
| Goodwill written off to reserves |
––
|
16
|
|
|
|
|
|
187
|
2,364
|
|
|
|
|
|
Note : Goodwill written off to reserves relates to acquisitions made before 1 January 1998. 1999 includes final fair value adjustments in respect of Simon & Schuster which was acquired in 1998 (see note 25).
| all figures in £ millions | 1999 |
|
total
|
|
| Acquisition goodwill and fair values | |
| Acquisition cost |
240
|
|
|
|
| Book value of net assets acquired |
37
|
| Simon & Schuster final fair value adjustments (see page 87) |
22
|
| Other fair value adjustments |
(6)
|
|
|
|
| Fair value to the Group |
53
|
|
|
|
| Goodwill arising |
187
|
|
|
|
| all figures in £ millions |
provisional
fair value
31 dec 1998
|
revaluations
|
other
items
|
final
fair value
31 dec 1999
|
| Simon & Schuster | ||||
| Tangible fixed assets |
126
|
(5)
|
––
|
121
|
| Stocks |
299
|
(12)a
|
6
|
293
|
| Debtors |
306
|
(12)b
|
9
|
303
|
| Current asset investments |
151
|
––
|
27
|
178
|
| Creditors |
(236)
|
6)c
|
(7)
|
(237)
|
| Provisions |
(86)
|
10)d
|
––
|
(76)
|
| Deferred tax |
(1)
|
––
|
––
|
(1)
|
| Net borrowing |
(3)
|
––
|
––
|
(3)
|
|
|
|
|||
| Net assets acquired |
556
|
(13)
|
35
|
578
|
|
|
|
|||
Note : Simon & Schuster was acquired at the end of 1998 and provisional fair value adjustments were made in the 1998 accounts. Final fair value adjustments have been made in 1999.
Revaluations
a. In respect of obsolete product £6m of acquired finished goods and work in progress has been written off. Pre-publication expenditure has been reduced by £2m to its net realisable value.
b. Debtors have been reduced by £12m to bring them to their net realisable value. This is to increase the reserve for returns in view of actual returns experienced in 1999 in respect of pre-acquisition sales. Further provision has been made for debts acquired which could not be collected.
c. Certain excess accruals included in the acquisition balance sheet, no longer required, have been released.
d. Acquired pension and post-retirement medical benefit obligations have been reduced by £22m following actuarial valuations performed during the year. Further contractual pension liabilities of £6m have been accrued.
Other items
Other items relate to the businesses of Simon & Schuster that Pearson held for resale. These businesses were included in current asset investments at the anticipated net proceeds from sale. During 1999 these businesses, except for Prentice Hall Direct, were sold with net proceeds exceeding the original estimate. The net assets of Prentice Hall Direct have been reinstated in the balance sheet.
Simon & Schuster impairment review
An initial impairment review has been carried out in 1999 in respect of Simon & Schuster, following its acquisition in November 1998, which compared the post-acquisition performance of the business with the pre-acquisition forecasts used to support the purchase price. This review indicated that the post-acquisition performance had met the pre-acquisition expectations. As such there has been no impairment of goodwill.
| all figures in £ millions |
1999
|
||
|
net assets
|
|||
|
cost
|
acquired
|
goodwill
|
|
| Total goodwill arising on acquisitions | |||
| Subsidiaries and businesses (see above) |
240
|
53
|
187
|
| Associates |
54
|
25
|
29
|
|
|
|
||
|
294
|
78
|
216
|
|
|
|
|
||
| all figures in £ millions | 1999 | 1998 |
| Cash flow from acquisitions | ||
| Cash – current year acquisitions (see page 86) |
267
|
2,918
|
| Deferred payments for prior year acquisitions and other items |
(18)
|
18
|
|
|
|
|
| Net cash outflow |
249
|
2,936
|
|
|
|
|
Note : Contributions to the cash flow from acquisitions in 1999 are as follows: net cash inflow from operating activities £1m.
 |
Top of Page |