As permitted by Section 230(3) of the Companies Act 1985,the Company's entity profit and loss account and statement of total recognised gains and losses have not been presented.

The Company has taken advantage of the exemption in 'FRS 8 Related Party Disclosures' not to disclose transactions with other members of the Smiths Group.

The Company is exempt under the terms of 'FRS 1 (Revised 1996) Cash Flow Statements' from the requirement to publish its own cash-flow statement, as its cash-flows are included within the consolidated cash-flow statement of the Group.

Changes in accounting policies
The Company has adopted 'FRS 20 Share-based Payment', 'FRS 21 Events after the Balance Sheet Date', 'FRS 23 The Effects of Changes in Foreign Exchange Rates', 'FRS 25 Financial Instruments: Disclosure and Presentation', 'FRS 26 Financial Instruments: Measurement' and 'FRS 28 Comparative Amounts' in these financial statements. The adoption of these standards represents a change in accounting policy and the comparative figures have been restated accordingly except where the exemption to restate comparatives has been taken. Details of the effects of prior year adjustments are given in note 9.

Foreign currencies
Foreign currency transactions are recorded at the exchange rate ruling on the date of transaction. Foreign exchange gains and losses resulting from the settlement of such transactions, and from the retranslation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies, are recognised in the profit and loss account. The Company adopted 'FRS 23 The Effects of Changes in Foreign Exchange Rates' on 1 January 2005. The adoption of this standard did not have a material impact on the Company's balance sheet.

Tangible fixed assets
Depreciation is provided at rates estimated to write off the relevant assets by equal annual amounts over their expected useful lives. In general, the rates used are: Freehold and long leasehold buildings – 2%, Short leasehold property – over the period of the lease, Plant, machinery, etc. – 10% to 20%, Motor vehicles – 25%, Tools and other equipment – 10% to 33%. Payments made under operating leases are charged to the profit and loss account as incurred over the term of the lease.

Freehold properties
These financial statements include certain properties at 1974 valuation, less depreciation on the enhanced values calculated in accordance with the policy set out above. The directors have decided to invoke the transitional provisions of 'FRS 15 Tangible Fixed Assets', and do not intend to revalue these properties every year.

Leased properties
Where a leasehold property is vacant, or sub-let under terms such that the rental income is insufficient to meet all outgoings, provision is made for the anticipated future shortfall up to termination of the lease.

Fixed asset investments
The Company's investment in shares in group companies are stated at cost less provision for impairment. Any impairment is charged to the profit and loss account as it arises.

Financial instruments
The Company's accounting policies under UK GAAP namely 'FRS 25 Financial Instruments: Disclosure and Presentation' and 'FRS 26 Financial Instruments: Measurement' are the same as the Smiths Group's accounting policies under International Financial Reporting Standards (IFRSs) namely 'IAS 32 Financial Instruments: Disclosure and Presentation' and 'IAS 39 Financial Instruments: Recognition and Measurement'. These standards are effective from 1 August 2005 and the policies are set out under the heading 'Financial instruments' in note 20 to the consolidated accounts. The Company is not providing all the financial instruments disclosures, because the required disclosures are given in note 20 to the consolidated accounts. The changes to profit retained in this regard are set out in the following notes and further described in the notes to the consolidated accounts.

Taxation
Deferred tax is recognised in respect of timing differences that have originated but not reversed as at the balance sheet date. Timing differences are differences between the Company's taxable profits and its results as disclosed in the accounts, arising from the inclusion of gains and losses in tax assessments in periods different from those in which they are recognised in the accounts.

Deferred tax is recognised in respect of the retained earnings of overseas subsidiaries and associates only to the extent that, at the balance sheet date, dividends have been declared or an obligation is present to distribute past earnings. Deferred tax is not recognised on any fixed assets that have been revalued unless there is a binding agreement to sell the asset.

Provisions
Provisions for vacant leasehold property are recognised when the Company has a legal or constructive obligation as a result of a past event; it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated.

Where a leasehold property is vacant, or sub-let under terms such that the rental income is insufficient to meet all outgoings, provision is made for the anticipated future shortfall up to termination of the lease, or the termination payment, if smaller.

Post-retirement benefits
For defined benefit schemes, the cost of benefits accruing during the year in respect of current and past service is charged against operating profit. The expected return on the schemes' assets and the increase in the present value of the schemes' liabilities arising from the passage of time are included in other finance income. Actuarial gains and losses are recognised in the statement of total recognised gains and losses. The balance sheet includes the surplus/deficit in schemes taking assets at their year-end market values and liabilities at their actuarially calculated values discounted at year-end AA corporate bond interest rates.

Amounts charged in respect of defined contribution schemes are the contributions payable in the year.

Share-based Payment
The Company operates a number of equity-settled share-based compensation plans. The fair value of the employee services received in exchange for the grant of shares or share options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the shares or share options granted, excluding the impact of any non-market vesting conditions (for example profitability and sales growth targets). Fair value is determined by reference to option pricing models, principally Binomial models.

The Company has applied the requirements of 'FRS 20 Share-based Payment'. In accordance with the transitional provisions, FRS 20 has been applied only to grants of equity instruments after 7 November 2002 that had not vested as at 1 January 2005.

Events after the balance sheet date
The ASB issued 'FRS 21 Events after the Balance Sheet Date' in May 2004. This standard replaced 'SSAP 17 Accounting for Post Balance Sheet Events' and the main effect of this change is to prohibit the recording of a provision for a proposed dividend where the dividend is declared after the balance sheet date. FRS 21 is applicable for accounting periods beginning on after 1 January 2005. Therefore final dividends are now only recognised when shareholders have approved such amount and interim dividends are only recognised when paid.