Tomkins PLC is a British company that operates in three business sectors: industrial and automotive, air systems components, and engineering and construction products. Before 2005 Tomkins prepared its accounts in accordance with United Kingdom (U.K.) accounting standards. Like U.S. reporting, U.K. financial reporting is investor-oriented. As a result, British companies report different income amounts for tax and financial reporting purposes. British companies receive different tax treatment for such items as depreciation

(capital allowances), and they receive tax credits for operating losses. In 2004 Tomkins reported income of £171.8 million and reported total shareholders’ funds of £1,398.7 million at year-end. Tomkins provided the following disclosures related to taxes in its annual report.

If Tomkins had used U.S. GAAP its income would have been higher by £96.1 million in the current year. —

Stockholders’ equity at year-end would have been £764.9 million higheri fT ompkins had applied U.S. GAAP.