GSK takes £394 million profit hit from IFRS

Pharmaceutical giant GlaxoSmithKline announced yesterday that switching reporting standards to IFRS cost its shareholders £394 million in 2004.

At the company’s annual results, CEO JP Garnier described how the new standards had lowered GSK’s profits attributable to shareholders from £4.302 billion to £3.908 billion, a fall of almost 10%, and turnover from £20.359 billion to £19.986 billion.

The biggest culprit for GSK was the reclassification of marketing and promotional expenditure. Under IFRS this customer spending is deducted directly from turnover, subtracting £373 million from GSK’s revenue in 2004.