Diageo PLC (DEO) | Analysis of Investments

Investment Accounting Policy

 Associates and joint ventures

An associate is an undertaking in which the group has a long term equity interest and over which it has the power to exercise significant influence. Diageo's interest in the net assets of associates is included in investments in the consolidated balance sheet and its interest in their results is included in the consolidated income statement below Diageo's operating profit. Investments in associates are reviewed for impairment at least annually or whenever events or circumstances indicate that the carrying amount may not be recoverable. The impairment review compares the net carrying value with the recoverable amount, where the recoverable amount is the value in use calculated as the present value of Diageo's share of the associate's future cash flows or its fair market value. Joint ventures, where there is contractual joint control over the entity, are accounted for by including on a line-by-line basis the attributable share of the results, assets and liabilities.

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand and deposits which are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value and have an original maturity of three months or less at acquisition, including money market deposits, commercial paper and investments.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date.

Source: Diageo PLC, Annual Report

Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities

Diageo PLC, adjustment to Profit For The Year Attributable To Equity Shareholders Of The Parent Company

	12 months ended	Jun 30, 2011	Jun 30, 2010	Jun 30, 2009	Jun 30, 2008	Jun 30, 2007	Jun 30, 2006
	Profit for the year attributable to equity shareholders of the parent company (as reported)
	Add: Fair value gains (losses) on available-for-sale investments
	Profit for the year attributable to equity shareholders of the parent company (adjusted)

Adjusted Ratios: Mark to Market Available-for-sale Securities (Summary)

Diageo PLC, adjusted ratios

		Jun 30, 2011	Jun 30, 2010	Jun 30, 2009	Jun 30, 2008	Jun 30, 2007	Jun 30, 2006
	Net Profit Margin
	Reported net profit margin	%	%	%	%	%	%
	Adjusted net profit margin	%	%	%	%	%	%
	Return on Equity (ROE)
	Reported ROE	%	%	%	%	%	%
	Adjusted ROE	%	%	%	%	%	%
	Return on Assets (ROA)
	Reported ROA	%	%	%	%	%	%
	Adjusted ROA	%	%	%	%	%	%

Adjusted Net Profit Margin

		Jun 30, 2011	Jun 30, 2010	Jun 30, 2009	Jun 30, 2008	Jun 30, 2007	Jun 30, 2006
	As Reported
	Profit for the year attributable to equity shareholders of the parent company (USD $ in millions, translated from GBP £)
	Sales (USD $ in millions, translated from GBP £)
	Net profit margin1	%	%	%	%	%	%
	Adjusted: Mark to Market Available-for-sale Securities
	Adjusted profit for the year attributable to equity shareholders of the parent company (USD $ in millions, translated from GBP £)
	Sales (USD $ in millions, translated from GBP £)
	Adjusted net profit margin2	%	%	%	%	%	%

2011 Calculations

Adjusted Return On Equity (ROE)

		Jun 30, 2011	Jun 30, 2010	Jun 30, 2009	Jun 30, 2008	Jun 30, 2007	Jun 30, 2006
	As Reported
	Profit for the year attributable to equity shareholders of the parent company (USD $ in millions, translated from GBP £)
	Equity attributable to equity shareholders of the parent company (USD $ in millions, translated from GBP £)
	ROE1	%	%	%	%	%	%
	Adjusted: Mark to Market Available-for-sale Securities
	Adjusted profit for the year attributable to equity shareholders of the parent company (USD $ in millions, translated from GBP £)
	Equity attributable to equity shareholders of the parent company (USD $ in millions, translated from GBP £)
	Adjusted ROE2	%	%	%	%	%	%

2011 Calculations

Adjusted Return On Assets (ROA)

		Jun 30, 2011	Jun 30, 2010	Jun 30, 2009	Jun 30, 2008	Jun 30, 2007	Jun 30, 2006
	As Reported
	Profit for the year attributable to equity shareholders of the parent company (USD $ in millions, translated from GBP £)
	Total assets (USD $ in millions, translated from GBP £)
	ROA1	%	%	%	%	%	%
	Adjusted: Mark to Market Available-for-sale Securities
	Adjusted profit for the year attributable to equity shareholders of the parent company (USD $ in millions, translated from GBP £)
	Total assets (USD $ in millions, translated from GBP £)
	Adjusted ROA2	%	%	%	%	%	%

2011 Calculations