211To Our Shareholders
Supervisory Board
Year in Review
Combined Group Management Report
Additional Information
Market Units
Corporate Governance
Consolidated Financial Statements
Tables and Explanations
Tables and Overviews
Additional Explanations Concerning the IFRS
Reconciliations
In addition to the explanations in Note 35 concerning the
reconciliation of equity and net income, the following
describes the effects of the transition to IFRS on other
important key financial figures.
The increase in adjusted EBIT according to IFRS is primarily
due to the change in measurement of gas inventories from
LIFO under U.S. GAAP to average-cost measurement under
IFRS. An additional positive effect results from the reduction
compared with U.S. GAAP of the expense for pensions, which
is primarily due to the elimination of the amortization of
actuarial gains and losses in the income statement. The
immediate recognition in income of U.S. regulatory assets
and liabilities recognized in accordance with U.S. GAAP with-
in the U.S. Midwest market unit also led to an increase in
adjusted EBIT.
These positive effects were offset in 2006 by the negative
impact of differences in the accounting for miscellaneous
provisions. As required under IFRS, the adjusted EBIT of the
"other activities" which was attributable to the equity earn-
ings of E.ON's share in Degussa under U.S. GAAP, has been
reclassified to discontinued operations.
For a detailed explanation of these effects, see the description
in Note 35 of the reconciliation of equity and net income.
Reconciliation of Adjusted Net Income
The following table describes the reconciliation from U.S. GAAP
to IFRS of adjusted net income for the 2006 fiscal year:
in millions
Adjusted EBIT under
U.S. GAAP2
Inventories
Pensions and similar
obligations
Miscellaneous provisions
Derivatives
U.S. regulation
Other
Total adjustments
Adjusted EBIT under IFRS
Central
Europe
4,168
1
102
33
69
67
4,235
Pan-
European
Gas
2,106
213
9
7
26
241
2,347
U.S. Mid-
west
391
3
32
35
426
Corporate
Center
416
8
3
8
13
403
U.K.
1,229
6
8
4
10
1,239
Nordic
619
107
107
512
E.ON
Group
8,150
214
128
84
8
32
92
206
8,356
Core
Energy
Business
8,097
214
128
84
8
32
39
259
8,356
Other
activities1
53
53
53
0
Reconciliation of Adjusted EBIT 2006
Reconciliation of Adjusted EBIT
The reconciliation of adjusted EBIT from U.S. GAAP to IFRS
for the year ended December 31, 2006, is presented in the
following tables:
in millions
Adjusted net income under U.S. GAAP1
Differences in EBIT
Adjusted interest income (net)
Income taxes
Minority interests
Total adjustments
Adjusted net income under IFRS
2006
4,386
206
133
73
30
296
4,682
Reconciliation of Adjusted Net Income
1Non-GAAP financial measure; see reconciliation in 2006 Annual Report, page 37.
The definition and reconciliation of net income to adjusted
net income under IFRS is presented on page 40.
In addition to the differences in adjusted EBIT, the increase
in 2006 of adjusted net income as compared with U.S. GAAP
is due primarily to the differences in adjusted interest income,
which result mainly from the differences in the accounting
treatment of miscellaneous provisions, which are described in
Note 35.
1Included in the other activities under U.S. GAAP was the 42.9 percent interest in Degussa accounted for at equity until its disposal in July 2006.
2Non-GAAP financial measure; see reconciliation in 2006 Anual Report, page 36.