- Annual Review 2006
- Overview
- Chairman's message
- Interview with the chief executive
- Selected financial data
- Features
- Review of operations
- Financial information by business unit
- Summary financial statements
- Australian Corporations Act - summary of ASIC relief
- Independent auditors' statement
- Management overview
- Directors' report
- Remuneration report
- Corporate governance
- Audit committee charter
- Shareholder information
- Useful addresses
- Investor calendar
- Publications
Net earnings and underlying earnings
| 2006 US$m |
2005 US$m | |
|---|---|---|
| Underlying earnings | 7,338 | 4,955 |
| Items excluded from underlying earnings | ||
| Profits less losses on disposal of interests in businesses (including investments) (a) | 3 | 311 |
| Impairment reversals less charges (b) | 44 | 4 |
| Exchange differences and derivatives: | ||
| - Exchange gains/(losses) on external net debt and intragroup balances (c) | (16) | (87) |
| - Gains/(losses) on currency and interest rate derivatives not qualifying for hedge accounting (d), (e) | 30 | (40) |
| - Gains/(losses) on external net debt and derivatives not qualifying for hedge accounting in equity accounted units (c), (d), (e) | 2 | (12) |
| Adjustment to environmental remediation provision (f) | 37 | 84 |
| Net earnings | 7,438 | 5,215 |
'Underlying earnings' is an additional measure of earnings, which is reported by Rio Tinto to provide greater understanding of the underlying business performance of its operations. Underlying earnings and Net earnings both represent amounts attributable to Rio Tinto shareholders. Items (a) to (f) below are excluded from Net earnings in arriving at Underlying earnings.
- Gains and losses arising on the disposal of interests in businesses.
- Credits and charges relating to impairment of non current assets, other than undeveloped properties.
- Exchange gains and losses on US dollar debt and intragroup balances.
- Valuation changes on currency and interest rate derivatives which are ineligible for hedge accounting, other than those embedded in commercial contracts.
- The currency revaluation of embedded US dollar derivatives contained in contracts held by entities whose functional currency is not the US dollar.
- Other credits and charges that, individually, or in aggregate if of a similar type, are of a nature or size to require exclusion in order to provide additional insight into underlying business performance.
The 'adjustment to environmental remediation provision' of US$37 million (2005: US$84 million) relates to the obligations of Kennecott Utah Copper. It reverses part of an exceptional charge taken up in 2002, which was excluded from Adjusted earnings at that time. This reversal is therefore excluded in arriving at Underlying earnings.
The Group frequently sells undeveloped properties as an alternative to development, and such activities are a component of the Group's regular business activities. For this reason, the above definition of Underlying earnings has been amended in 2006 to include gains and losses on sales of undeveloped properties and impairment charges relating to these. This change in definition resulted in an increase of US$46 million in the Group's Underlying earnings for 2006 but has no impact on Underlying earnings for 2005.
