|
Accounting policies Research expenditure is expensed as incurred. Internal development expenditure is only capitalised if the recognition criteria in IAS 38 Intangible Assets have been satisfied. The Group considers that the regulatory, technical and market uncertainties inherent in the development of new products mean that in most cases development costs should not be capitalised as intangible assets until products receive approval from the appropriate regulatory body. Payments to third parties for research and development projects are accounted for based on the substance of the arrangement. If the arrangement represents outsourced research and development activities the payments are generally expensed except in limited circumstances where the respective development expenditure would be capitalised under the principles established in IAS 38. By contrast, the payments are capitalised if the arrangement represents consideration for the acquisition of intellectual property developed at the risk of the third party. Capitalised development expenditures are amortised on a straight-line basis over their useful economic lives from product launch. Advertising costs Advertising costs are expensed as incurred. |
|
|
|
2017 |
|
2016 |
|
2015 |
|
|
|
|
$ million |
|
$ million |
|
$ million |
|
|
Revenue |
|
4,765 |
|
4,669 |
|
4,634 |
|
|
Cost of goods sold |
|
(1,248) |
|
(1,272) |
|
(1,143) |
|
|
Gross profit |
|
3,517 |
|
3,397 |
|
3,491 |
|
|
Research and development expenses |
|
(223) |
|
(230) |
|
(222) |
|
|
Selling, general and administrative expenses: |
|
|
|
|
|
|
|
|
Marketing, selling and distribution expenses |
|
(1,781) |
|
(1,712) |
|
(1,735) |
|
|
Administrative expenses1,2,3,4 |
|
(579) |
|
(654) |
|
(906) |
|
|
|
|
(2,360) |
|
(2,366) |
|
(2,641) |
|
|
Operating profit |
|
934 |
|
801 |
|
628 |
|
|
1 |
2017 includes $62m of amortisation of software and other intangible assets (2016: $61m, 2015: $66m). |
|
2 |
2017 includes $140m of amortisation and impairment of acquisition intangibles (2016: $62m of restructuring and rationalisation expenses and $178m of amortisation and impairment of acquisition intangibles, 2015: $65m of restructuring and rationalisation expenses and $204m of amortisation and impairment of acquisition intangibles). |
|
3 |
2017 includes $16m credit relating to legal and other items (2016: $30m credit, 2015: $190m charge). |
|
4 |
2017 includes $10m credit of acquisition-related costs (2016: $9m charge, 2015: $12m charge). |
Note that items detailed in 2, 3, 4 are excluded from the calculation of trading profit, the segment profit measure.
Operating profit is stated after charging/(crediting) the following items:
|
|
|
2017 |
|
2016 |
|
2015 |
|
|
|
|
$ million |
|
$ million |
|
$ million |
|
|
Other operating income |
|
(66) |
|
(25) |
|
(41) |
|
|
Amortisation of intangibles |
|
192 |
|
191 |
|
219 |
|
|
Impairment of intangible assets |
|
10 |
|
48 |
|
51 |
|
|
Depreciation of property, plant and equipment |
|
243 |
|
224 |
|
226 |
|
|
Loss on disposal of property, plant and equipment and intangible assets |
|
13 |
|
15 |
|
15 |
|
|
Operating lease payments for land and buildings |
|
36 |
|
39 |
|
37 |
|
|
Operating lease payments for other assets |
|
21 |
|
19 |
|
20 |
|
|
Advertising costs |
|
102 |
|
88 |
|
91 |
|
In 2017 other operating income primarily relates to a gain relating to patent litigation (2016: insurance recovery relating to metal-on-metal claims, 2015: net gain relating to patent litigation).
3 OPERATING PROFIT continued
3.1 Staff costs and employee numbers
Staff costs during the year amounted to:
|
|
|
|
|
2017 |
|
2016 |
|
2015 |
|
|
|
|
Notes |
|
$ million |
|
$ million |
|
$ million |
|
|
Wages and salaries |
|
|
|
1,157 |
|
1,227 |
|
1,193 |
|
|
Social security costs |
|
|
|
178 |
|
129 |
|
135 |
|
|
Pension costs (including retirement healthcare)1 |
|
18 |
|
64 |
|
23 |
|
58 |
|
|
Share-based payments |
|
23 |
|
31 |
|
27 |
|
30 |
|
|
|
|
|
|
1,430 |
|
1,406 |
|
1,416 |
|
1 In 2016, pension costs include the past service cost credit of $49m arising primarily from the closure of the UK defined benefit scheme to future accrual.
During the year ended 31 December 2017, the average number of employees was 16,333 (2016: 15,584, 2015: 14,686).
3.2 Audit Fees – information about the nature and cost of services provided by the auditor
|
|
|
2017 |
|
2016 |
|
2015 |
|
|
|
|
$ million |
|
$ million |
|
$ million |
|
|
Audit services: |
|
|
|
|
|
|
|
|
Group accounts |
|
2.4 |
|
2.0 |
|
2.1 |
|
|
Local statutory audit pursuant to legislation |
|
2.0 |
|
2.0 |
|
2.0 |
|
|
Other services: |
|
|
|
|
|
|
|
|
Non-audit services |
|
0.1 |
|
0.5 |
|
0.5 |
|
|
Taxation services: |
|
|
|
|
|
|
|
|
Compliance services |
|
– |
|
0.1 |
|
0.5 |
|
|
Advisory services |
|
– |
|
– |
|
– |
|
|
Total auditor’s remuneration |
|
4.5 |
|
4.6 |
|
5.1 |
|
|
Arising: |
|
|
|
|
|
|
|
|
In the UK |
|
2.5 |
|
2.5 |
|
2.5 |
|
|
Outside the UK |
|
2.0 |
|
2.1 |
|
2.6 |
|
|
|
|
4.5 |
|
4.6 |
|
5.1 |
|