IOOF  | Annual Report 2012 UNPAT adjus tment s Amortisation of intangible assets:  Non-cash entry reflective  of declining intangible asset values over their useful lives.  Intangible assets are continuously generated within the  Group, but are only able to be recognised when acquired. The  absence of a corresponding entry for intangible asset creation  results in a conservative one sided decrement to profit only.  It is reversed to ensure the operational result is not impacted.  The reversal of amortisation of intangibles is routinely  employed when performing company valuations. Impairment:  Non-cash entry which reflects a point in time  valuation of assets which is unable to be reversed to profit  in future periods should the original value prove to be  restored. The entry is not related to the conventional recurring  operations of the Group. Acquisition costs – DKN:  One off payments to external  advisers by both DKN and IOOF in pursuit of a successful  acquisition which are not reflective of conventional recurring  operations. Termination and retention incentive payments:  Facilitation of restructuring to ensure long term efficiency  gains, predominantly DKN related in the current period and  AWM related in the prior comparative period, which are not  reflective of conventional recurring operations. Recognition and unwind of deferred tax liability recorded  on intangible assets:  Acquired intangible asset valuations  for AASB 3  Business Combinations  accounting are higher than  the required cost base as set under newly legislated tax  consolidation rules. A deferred tax liability (“DTL”) is required  to be recognised as there is an embedded capital gain should  the assets be disposed of at their accounting values. This DTL  reduces in future periods at 30% of the amortisation applicable  to those assets which have different accounting values and  tax cost bases. The recognition of DTL and subsequent  period reductions are not reflective of conventional recurring  operations and are regarded as highly unlikely to be realised  due to the Group’s intention to hold these assets long term. Profit on life policy transfer:  The life policies held in the IOOF Life statutory fund were disposed of on 2 September 2010 and resulted in a non-recurring profit on sale. Fair value gain on investment in DKN:  An initial 18.5%  holding in DKN prior to its acquisition means this is a business  combination achieved in stages under AASB 3. The Group  is therefore required to measure this previously held equity  interest in DKN at acquisition-date fair value and recognise  the resulting gain in P&L. The initial entry ensures the assets  acquired are held on balance sheet at fair value, however  Basic earnings per share decreased from 43.1 cents per share in  the year to 30 June 2011 to 8.4 cents per share for the year to  30 June 2012. The Group incurred debt of $55 million to facilitate the $96  million acquisition of DKN. The residual amount was funded  through DKN’s cash reserves of approximately $10 million and  the Group’s pre-acquisition cash reserves. Details pertinent  to the borrowings incurred and the subsidiary acquired are  contained in notes to the financial statements. The uncertain economic environment responsible for the  market value declines noted has also had an unfavourable  impact on other revenue lines, most notably stockbroking  where the sector’s traded volumes generally remain low in  comparison to the years preceding the global financial crisis.  The Group has constrained its costs to below inflation with the  exceptions of increasing expenditure on its technology and  brand to promote the long term interests of its businesses. The Group’s Funds Under Management, Advice, Administration  and Supervision (FUMAS) were $107.3 billion as at 30 June  2012, an increase of $1.1 billion from 30 June 2011. This  movement is primarily a result of acquiring DKN funds under  advice offset by decreases in the market value of the assets  underpinning FUMAS and net institutional outflows in Funds  Under Management. The resultant impact has been a decline  in FUMAS related net revenue and expense of approximately  $14.2 million in the pre-acquisition businesses partly offset by  a FUMAS related net revenue and expense contribution from  DKN of $16.9m (all amounts pre-tax).  Reinstatement of Perennial non-controlling interests: Embedded derivatives exist given the Group’s obligation to  buy-back shareholdings in certain Perennial subsidiaries if put  under the terms of their shareholders’ agreements. IFRS deems  the interests of these non-controlling holders to have been  acquired. Those interests must therefore be held on balance  sheet as a liability to be revalued to a reserve each reporting  period. In calculating UNPAT, the non-controlling interest  holders share of the profit of these subsidiaries is subtracted  from the Group result as though there were no embedded  derivatives to better reflect the current economic interests of  Company shareholders in the activities of these subsidiaries. the impact on profit is reversed as it is regarded as highly  unlikely to be realised due to the Group’s intention to hold its  investment in DKN long term. page 23