Notes to the accounts

2 Operating profit is after charging

	Period ended 31 July 2007 £m	Period ended 5 August 2006 £m
Cost of inventories recognised as an expense	1,582.1	1,596.6
Employee costs (2006 restated) (note 11)	645.2	662.5
Depreciation of property, plant and equipment including impairment of £8.1m (2006: £1.8m)	51.9	49.8
Amortisation of intangible assets including impairment of £2.2m (2006: £nil)	28.1	20.2
Impairment losses recognised in the period on receivables	1.3	0.9
Research and development expense	52.3	55.0
Operating leases
– land and buildings	18.9	17.0
– other	7.2	8.0
Fair value movements on derivatives
– embedded	0.8
– held for trading	0.7	(0.5)

Other operating income comprises the income received following the commutation of insurance policies (£42.9m – see note 4) and the profit on sale of a financial asset (£24.0m – see note 15).

	Period ended 31 July 2007 £m	Period ended 5 August 2006 (restated) £m
Audit services
Fees payable to the Company’s auditors for the audit of the parent company and consolidated accounts	0.4	0.4
Fees payable to the Company’s auditors and its associates for other services:
– The audit of the Company’s subsidiaries, pursuant to legislation	3.6	4.2
– Other services pursuant to legislation	0.1	0.1
	4.1	4.7
Tax services
– compliance services	0.1	0.4
– advisory services	0.7	0.3
Services in relation to corporate acquisition and disposal transactions
– sale of Aerospace	1.8
– aborted transaction	1.1
– B-share issue	0.3
– due diligence	0.9	0.1
All other services	0.2	0.9

Other services relate to one off projects. In 2006 other services included £0.5m in respect of advisory work in connection with the Group’s adoption of IFRS.

The 2006 audit fees have been restated in order to provide the greater detail required by the Disclosure of Auditor Remuneration Regulation.

Smiths Group divisions:
Smiths Detection, Smiths Medical, Smiths Specialty Engineering