Here we have a US GAAP valuation adjustment example. The only thing we need to remember to do with the US GAAP is to calculate the debt equivalent value using the footnotes that we'll find in a company set of accounts. Here we've got a footnote. I can see I've got three line items being ending benefit, obligation, ending fair value of plan assets, but it's the third one I really care about, the ending funded status. I can also see that that refers to three columns. We've got pension benefits in the US pension benefits non-US and global OPEB plans. Other post-employment benefits. The funded status figures I take down into my table. We've taken lots of other figures as well, but it's really the funded status I care about. We've called it a deficit, and over on the right hand side, you can see it totals up to 18,186. However, contributions to pension plans receive tax benefits. So I go back into the footnotes and I find the deferred tax asset footnote. Here there are two line items. We've got post-retirement benefits, and then you've got pensions and the two figures there, if we add them both up, we put them into our table, come to 4,663, they're netted off the total deficit. So we get down to our debt equivalent figure of 13,523 right at the bottom. Now what can I do with that? I can put that into my EV equity bridge as a debt equivalent. Now let's look at an IFRS valuation adjustment example. And we need to do two things here. We need to calculate the debt equivalent value using footnotes just as we would under US GAAP. But then we also need to do a check. We need to check whether EBIT needs adjusting. Maybe there are some figures in there that shouldn't be in there. The figure I'm caring about here is interest to do with pensions. So here we have our first footnotes and I have three columns. I've got my assets, liabilities, and it's that third column I care about. That's that deficit. This company's got a number of different plans. It's got a BTPS and EEPS and other plans. All of them come together. I put them into my table. I can see my total deficits is 1,140, but I still need to tax adjust that figure. So can I go into the footnotes and find a deferred tax figure? Well, luckily it was already in our table. The deferred tax asset was 175. I net that off the deficit and I get to my debt equivalent of 965. That debt equivalent can go into my EV equity bridge, but I still need to do some checks to see whether my EBIT needs adjusting. And again, I go into my footnotes and I can see in this table we've got an operating loss of 328, and I can see the net finance expense immediately below the operating costs includes interest expense on retirement benefit obligations. I was concerned that that interest might be above the operating loss line. It might be in EBIT, it might be in my operating expenses, but it's not. It's below that, so it's not dirtying my EBIT or dirtying the operating loss. So there's no EBIT adjustment required.
