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iv Accounting for share options

Under UK GAAP, the company does not recognise compensation expense for the fair value, at the date of grant, of share options granted under the employee share option schemes. Under US GAAP, the company adopted the disclosure-only provisions in SFAS No. 123 “Accounting for Stock-Based Compensation”. Accordingly, the company accounts for share options in accordance with APB Opinion No. 25 “Accounting for Stock Issued to Employees”, under which no compensation expense on fixed plans, other than SAYE plans, is recognised. Had the group recognised compensation cost for options granted in accordance with SFAS No. 123, the group’s pro forma net income (loss), basic earnings (loss) per share and diluted earnings (loss) per share under US GAAP would have been £1,289 million (2004 – £862 million, 2003 – £4,127 million), 15.1p (2004 – 10.0p, 2003 – 47.9p) and 15.0p (2004 – 9.9p, 2003 – 47.6p), respectively. See note 31 for the SFAS No. 123 disclosures of the fair value of options granted under employee schemes at date of grant.




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