Repsol

Transition to International Financial Reporting Standards (IFRS)

Regulation (EC) No 1606/2002 of the European Parliament and Council of July 19, 2002, requires all companies with shares listed on a regulated market in any EU country to prepare their consolidated financial statements for all years beginning on or after January 1, 2005, in accordance with International Financial Reporting Standards (IFRS) as validated by the EU. The Repsol YPF Group is consequently obliged to prepare its 2005 consolidated financial statements in accordance with International Financial Reporting Standards as validated by the EU. The obligation to prepare annual consolidated financial statements under EU IFRS has also been incorporated into Spanish law in paragraph 11 of the final provisions of Law 62/2003, of December 30, on Tax, Labor and Social Security Measures (published in the Spanish Official Bulletin for December 31, 2003).

In accordance with IFRS 1 on First Time Adoption of International Financial Reporting Standards, approved by Regulation 707/2004/EC of the Commission on April 6 (published in the Official Journal of the European Union for April 17), although the first financial statements prepared under IFRS will be, in the Groups case, those for the year ending December 31, 2005, for comparative purposes the group must include corresponding figures for the previous fiscal year 2004, prepared on the same basis as used for the 2005 financial statements. This means preparing an initial or opening balance sheet at the transition date, January 1, 2004, under IFRS accounting principles conforming to the IFRS applying at December 31, 2005.

In fulfillment of its obligations under Regulation 1606/2002/EC and in Law 62/2003, the Group has drawn up an IFRS transition plan which includes the following points:

Analysis of the differences between the accounting principles applied under Spanish GAAP and IFRS, and the practical impact that such differences will have on the preparation of the Group financial statements.
Principles to be applied in cases where IFRS allows alternative treatments.
Evaluation and determination of changes to be made to the planning and organization of the compilation, translation and consolidation of information on group and associated companies.
Preparation of opening consolidated financial statements at the transition date in accordance with IFRS.
Preparation of the financial statements for each quarter 2005 in accordance with IFRS.

This work is currently underway and will be completed over the course of 2005. However, it will not be possible to provide a full and reliable estimate of the transitions impact taking account of all relevant information, as:

Some standards have yet to be approved or may be modified by the EU in 2005 (standards not yet adopted by the EU: IFRS 6 Exploration for and Evaluation of Mineral Resources, modifications under review: IAS 19 Employee Benefits and IAS 39 Financial Instruments).
IFRS 1 requires that final determination of the possible impact of the change in standards is calculated in accordance with IFRS and interpretations in force at year-end for the first financial statements prepared under IFRS. In the Groups case this means at December 31, 2005.