26 Reserves
  Non-distributable  
  Share
premium
£m		 Revaluation
reserves
£m		 Merger
reserve
£m		 Capital
redemption
reserve
£m		 Profit and
loss account1
£m
Group
At January 1, 2004 (as previously reported) 1 96 3 — 1,708
Prior year adjustment (see note 1) — — — — (1)
At January 1, 2004 (restated) 1 96 3 — 1,707
Exchange adjustments — — — — (38)
Scrip dividend adjustment — — (2) — 20
Arising on share issues (net of expenses) 3 — — — —
Transfers between reserves — (7) — — 7
Write-back of purchased goodwill relating to disposals — — 2 — —
Retained profit for the year — — — — 204
Relating to own shares — — — — (2)
Issue of B Shares — — — — (84)
Redemption of B Shares — — — 27 (27)
Conversion of B Shares into ordinary shares — — — 47 —
At December 31, 2004 4 89 3 74 1787
Company
At January 1, 2004 1 — 1,004 — 763
Scrip dividend — — (2) — 20
Arising on share issues (net of expenses) 3 — — — —
Retained profit for the year2 — — — — 601
Issue of B Shares — — (84) — —
Redemption of B Shares — — — 27 (27)
Conversion of B Shares into ordinary shares — — — 47 —
At December 31, 2004 4 — 918 74 1,357

The cumulative amount of goodwill, arising on the acquisition of undertakings still in the Group at December 31, 2004, written off against other reserves amounts to £370m (2003 £372m). The continuance of this basis, in respect of pre-1998 acquisitions, is permitted under the transitional arrangements of FRS 10.
 
1 The Group has adopted UITF 38 ‘Accounting for ESOP Trusts’ which requires own shares to be reclassified within shareholders funds. Amounts relating to own shares have been included in the profit and loss account reserve.
Ordinary shares in the Company are held in two trusts:
i) In respect of employee share schemes. The shares held by this independently managed trust were purchased on the open market:
 
          £m
May, 5 2004 37,130 at £1.95 per share 0.1
October, 22 2004 400,000 at £1.98 per share 0.8

At December 31, 2004, the shares held had a market value of £1.1m. In accordance with UITF 17 ‘Employee share schemes’, the Group is required to amortise the cost of likely awards over each separate performance measurement period and to include this charge as part of the cost of ‘wages and salaries’. The UITF is a committee of the Accounting Standards Board.
ii) In respect of a Qualifying Employee Share Trust (QUEST), which provides employees with shares under Inland Revenue approved Save As You Earn (SAYE) share schemes.
As permitted by UITF 17, no amortisation charge has been made. At December 31, 2004, a total of 410,747 of these shares had still not been allocated to option holders, their market value being £1.0m.
These outstanding allocations are expected to occur in 2005.
Both trusts have waived their voting rights, and their costs of administration have been charged to the Group’s profit and loss account.
2 A dividend of £601m was received on December 21, 2004 from a subsidiary company, Rolls-Royce plc. Of this amount, £550m is separately identified in the Company’s accounting records.