International Financial Reporting Standards (

1
International Financial Reporting Standards
(IFRS)

• Peter Hooley, Finance Director
• 17 November 2004

2
International Financial Reporting Standards
(IFRS)

• Under EU Regulation, Smith Nephew is required
  to report its results for 2005 under IFRS.
• Comparative information will be provided for 2003
  and 2004, which is the subject of this
  presentation.
• This comparative information may be amended by
  subsequent changes in IFRS and interpretations
  thereof.
• IFRS Impact
• Adjusted EPS -1.5 2003, -1 2004
• EBITA margin Neutral
• Cash Flow Neutral

3
IFRS Timetable

• 17 November 2004 - Quantification to investors
  of IFRS on 2003 and 2004 up to Quarter 3
• 3 February 2005 - Preliminary announcement of
  2004 results under UK GAAP
• - Quantification of IFRS on 2004 results
• - Thereafter 2005 on IFRS basis (including
  guidance)
• March 2005 - Publication of booklet containing
• Revised accounting policies under IFRS
• Reconciliations between UK GAAP and IFRS
  for income statements and balance sheets for
  2003 and 2004
• Restated income statements and balance
  sheets for 2003 and 2004, including quarters.
• May 2005 - Announcement of Quarter 1 2005
  results under IFRS.

4
The Main Impact of IFRS on Smith Nephew
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IFRS Changes to Adjusted EPS (m)
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First Time Adoption Options Selected

• Chosen to present 2003 and 2004 comparative
  information.
• Transition date 1 January 2003.
• Business Combinations - No restatement prior to
  transition date.
• Pensions - Full pension deficit recognised at
  transition and FRS 17 style costing
  approach adopted.
• Share Based Payments - Option pricing valuations
  and amortisation applied from 2003 2001 and
  2002 using values disclosed previously in 20-F
• Financial Instruments - 2003 and 2004 not
  restated for IAS 39.

7
IFRS Changes to Shareholders Funds (m)
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IFRS Changes to Income Statement - 2003 (m)
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How we get to adjusted EPS under IFRS (m)
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What does this mean for Smith Nephew?
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Income Statement under IFRS (m)
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Income Statement under IFRS 2003 (m)
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Assets under IFRS (m)
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Equity and Liabilities under IFRS (m)
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Business Unit Analysis under IFRS
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Forward Looking Statements
This presentation contains certain
forward-looking statements within the meaning
of the US Private Securities Litigation Reform
Act of 1995. In particular, statements regarding
planned growth in our business and in our
operating margins discussed under Outlook are
forward-looking statements. These statements, as
well as the phrases anticipate, well-placed,
believe, estimate, expect, target,
consider and similar expressions, are generally
intended to identify forward-looking statements.
Such forward-looking statements involve known and
unknown risks, uncertainties and other important
factors that could cause the actual results,
performance or achievements of Smith Nephew, or
industry results, to differ materially from any
future results, performance or achievements
expressed or implied by such forward-looking
statements. Please refer to the documents that
Smith Nephew has filed with the U.S. Securities
and Exchange Commission under the U.S. Securities
Exchange Act of 1934, as amended, including Smith
Nephew's most recent annual report on Form
20-F, for a discussion of certain of these
factors. All forward-looking statements in this
presentation are based on information available
to Smith Nephew as of the date hereof. All
written or oral forward-looking statements
attributable to Smith Nephew or any person
acting on behalf of Smith Nephew are expressly
qualified in their entirety by the foregoing.
Smith Nephew does not undertake any obligation
to update or revise any forward-looking statement
contained herein to reflect any change in Smith
Nephew's expectation with regard thereto or any
change in events, conditions or circumstances on
which any such statement is based.
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