Barclays 2006 Annual Report Download - page 271

Barclays PLC
Annual Report 2006 267
Financial statements
3
60 Differences between IFRS and US GAAP accounting principles (continued)
(g) Securities (continued)
Held-to-maturity securities
2006 2005
Unrealised Unrealised
Book value gain/(loss) Fair value Book value gain /(loss) Fair value
Description of securities £m £m £m £m £m £m
Mortgage-backed securities 1,082 1 1,083 2,099 2 2,101
Other issuers 1,867 (3) 1,864 3,488 1 3,489
Total 2,949 (2) 2,947 5,587 3 5,590
The gross unrealised losses on the held to maturity securities amounted to £5m at 31st December 2006 (2005: £4m).
2006 2006
Book value Fair value
Maturing Maturing Maturing Maturing
Maturing after one after five Maturing Maturing after one after five Maturing
within but within but within after within but within but within after
one year five years ten years ten years one year five years ten years ten years
Description of securities £m £m £m £m £m £m £m £m
Mortgage-backed securities 324 585 14 159 324 586 14 159
Other issuers 925 747 99 96 922 746 100 97
Total 1,249 1,332 113 255 1,246 1,332 114 256
(h) Loan loss impairment
SFAS 114 applies only to impaired loans, the measurement of which is based upon the present value of expected future cash flows discounted at the
loan’s effective interest rate, the loan’s observable market value, or the fair value of the collateral if the loan is collateral dependent. Smaller balance
homogeneous consumer loans that are collectively evaluated for impairment are outside the scope of SFAS 114, as are debt securities and leases.
At 31st December 2006, the element of impaired loans outside the scope of SFAS 114 amounted to £3,583m (2005: £3,336m).
In accordance with SFAS 114, the Group’s total impaired loans being non-performing, less impaired loans outside the scope of SFAS 114, amount
to £1,459m at 31st December 2006 (2005: £1,874m). Credit risk provisions of £674m, estimated in accordance with SFAS 114, were held against
these loans (2005: £935m). The average level of such impaired lendings in 2006 was £1,706m (2005: £1,661m).
Where cash received represents the realisation of security, or there is doubt regarding the recovery of a loan, such receipts are treated as repayments
of the loan principal. Otherwise, cash received in respect of impaired loans is recognised as interest income. Estimated interest income which was
recognised in 2006 on impaired loans within the scope of SFAS 114 was £52m (2005: £13m, 2004: £24m).
SFAS 114 modifies the accounting for in-substance foreclosure, in that collateralised debts where the Group takes physical possession of the
collateral, regardless of formal insolvency procedures, would be reclassified as if the collateral had been acquired for cash. At 31st December 2006,
under US GAAP, the amount of collateral recorded at the lower of the book value of the debt or the fair value of the collateral that would
be reclassified as ‘property, plant and equipment’ was £12m (2005: £nil) and as debt and equity instruments was £nil (2005: £57m).
Mortgage loans of £10,856m (2005: £nil) are included within loans and advances to customers which are held with the intention of resale. During
the year £9,483m (2005: £nil) of loans were sold generating a net profit of £74m (2005: £nil, 2004: £31m).
(i) Business combination
In 2002, Barclays and Canadian Imperial Bank of Commerce completed the combination of their retail, corporate and offshore banking operations
and created FirstCaribbean International Bank. Until disposal on 22nd December 2006, under both IFRS and US GAAP, Barclays accounted for the
resulting interest as an associate. At the time of the combination, a gain of £206m was generated under both UK and US GAAP, the gain being
recorded in equity for UK GAAP but in the income statement under US GAAP (APB 29 and EITF 01-02). The net assets of the business transferred
by Barclays to the new entity were not materially different under US GAAP.
In 2004, an adjustment of £13m was made to the gain of £206m, which was also recorded in the income statement under US GAAP.