Barclays 2009 Annual Report Download - page 204

202 Barclays PLC Annual Report 2009 www.barclays.com/annualreport09
Consolidated accounts Barclays PLC
Accounting policies
continued
21. Employee benefits
The Group provides employees worldwide with post-retirement benefits
mainly in the form of pensions. The Group operates a number of pension
schemes which may be funded or unfunded and of a defined contribution
or defined benefit nature. In addition, the Group contributes, according to
local law in the various countries in which it operates, to Governmental and
other plans which have the characteristics of defined contribution plans.
For defined benefit schemes, actuarial valuation of each of the scheme’s
obligations using the projected unit credit method and the fair valuation of
each of the scheme’s assets are performed annually, using the assumptions
set out in Note 30. The difference between the fair value of the plan assets
and the present value of the defined benefit obligation at the balance sheet
date, adjusted for any historic unrecognised actuarial gains or losses and
past service cost, is recognised as a liability in the balance sheet. An asset
arising, for example, as a result of past over funding or the performance
of the plan investments, is recognised to the extent that it does not exceed
the present value of future contribution holidays or refunds of contributions.
Gains and losses on curtailments are recognised when the curtailment
occurs which is when there is a demonstrable commitment to make a
significant reduction in the number of employees covered by the plan or
amendments have been made to the terms of the plan so that a significant
element of future service will no longer qualify for benefits or will qualify only
for reduced benefits. The gain or loss comprises any resulting change in the
present value of the defined benefit obligation, any resulting change in the
fair value of the plan assets and any related actuarial gain or loss that had not
previously been recognised since they fell within the corridor.
Cumulative actuarial gains and losses in excess of the greater of 10% of
the assets or 10% of the obligations of the plan (the corridor) are recognised
in the income statement over the remaining average service lives of the
employees of the related plan, on a straight-line basis.
For defined contribution schemes, the Group recognises contributions
due in respect of the accounting period in the income statement. Any
contributions unpaid at the balance sheet date are included as a liability.
The Group also provides health care benefits to certain retired
employees, which are accrued as a liability in the financial statements over
the period of employment, using a methodology similar to that for defined
benefit pensions plans.
Short-term employee benefits, such as salaries, paid absences, and
other benefits including any related payroll taxes are accounted for on an
accruals basis over the period in which the employees provide the related
services. Bonuses are recognised to the extent that the Group has a present
obligation to its employees that can be measured reliably.
All expenses related to employee benefits are recognised in the income
statement in staff costs, which is included within operating expenses.
22. Share-based payments to employees
The Group engages in equity settled share-based payment transactions in
respect of services received from certain of its employees. The fair value of
the services received is measured by reference to the fair value of the shares
or share options granted on the date of the grant. The cost of the employee
services received in respect of the shares or share options granted is
recognised in the income statement over the period that the services are
received, which is the vesting period. The fair value of the options granted
is determined using option pricing models, which take into account the
exercise price of the option, the current share price, the risk-free interest rate,
the expected volatility of the share price over the life of the option and other
relevant factors. Except for those which include terms related to market
conditions, vesting conditions, which are service conditions or performance
conditions, included in the terms of the grant are not taken into account in
estimating fair value. Non-market vesting conditions are taken into account
by adjusting the number of shares or share options included in the
measurement of the cost of employee services so that ultimately, the
amount recognised in the income statement reflects the number of vested
shares or options. Where vesting conditions are related to market conditions,
the charges for the services received are recognised regardless of whether
or not the market-related vesting condition is met, provided that the non-
market vesting conditions are met. Similarly, non-vesting conditions, which
are other conditions not being service conditions or performance conditions,
are taken into account in estimating the grant date fair value and share-
based payment charges and are recognised when all non-market vesting
conditions are satisfied irrespective of whether the non-vesting conditions
are satisfied. If meeting a non-vesting condition is a matter of choice, failure
to meet the non-vesting condition is treated as a cancellation, resulting in
an acceleration of recognition of the cost of the employee services.
23. Provisions
Provisions are recognised for present obligations arising as consequences of
past events where it is more likely than not that a transfer of economic benefit
will be necessary to settle the obligation, and it can be reliably estimated.
When a leasehold property ceases to be used in the business or a
demonstrable commitment has been made to cease to use a property,
provision is made where the unavoidable costs of the future obligations
relating to the lease are expected to exceed anticipated rental income and
other benefits. The net costs are discounted using market rates of interest
to reflect the long-term nature of the cash flows.
Provision is made for the anticipated cost of restructuring, including
redundancy costs when an obligation exists. An obligation exists when the
Group has a detailed formal plan for restructuring a business and has raised
valid expectations in those affected by the restructuring by starting to
implement the plan or announcing its main features. The provision raised
is normally utilised within nine months.
Provision is made for undrawn loan commitments and similar facilities
if it is probable that the facility will be drawn and result in the recognition
of an asset at an amount less than the amount advanced.
Contingent liabilities are possible obligations whose existence will be
confirmed only by uncertain future events or present obligations where the
transfer of economic benefit is uncertain or cannot be reliably measured.
Contingent liabilities are not recognised but are disclosed unless they are
remote.
24. Taxes, including deferred taxes
Income tax payable on taxable profits (Current Tax), is recognised as an
expense in the period in which the profits arise. Income tax recoverable on
tax allowable losses is recognised as an asset only to the extent that it is
regarded as recoverable by offset against current or future taxable profits.
Deferred income tax is provided in full, using the liability method, on
temporary differences arising from the differences between the tax bases
of assets and liabilities and their carrying amounts in the consolidated
financial statements. Deferred income tax is determined using tax rates and
legislation enacted or substantially enacted by the balance sheet date which
are expected to apply when the deferred tax asset is realised or the deferred
tax liability is settled. Current Tax assets and liabilities are only offset when
they arise in the same tax reporting group and where there is both the legal
right and the intention to settle on a net basis or to realise the asset and
settle the liability simultaneously.
25. Segment reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the Executive Committee. The Executive Committee,
which is responsible for allocating resources and assessing performance of
the operating segments, has been identified as the chief operating decision
maker.
All transactions between business segments are conducted on an arm’s
length basis, with intra-segment revenue and costs being eliminated in
Head Office. Income and expenses directly associated with each segment
are included in determining business segment performance.
26. Cash and cash equivalents
For the purposes of the cash flow statement, cash comprises cash on hand
and demand deposits, and cash equivalents comprise highly liquid
investments that are convertible into cash with an insignificant risk of
changes in value with original maturities of less than three months.
Repurchase and reverse repurchase agreements are not considered to be
part of cash equivalents.
27. Trust activities
The Group commonly acts as trustees and in other fiduciary capacities that
result in the holding or placing of assets on behalf of individuals, trusts,
retirement benefit plans and other institutions. These assets and income
arising thereon are excluded from these financial statements, as they are not
assets of the Group.