Barclays 2010 Annual Report Download - page 206

Notes to the financial statements
For the year ended 31st December 2010 continued
1 Significant accounting policies continued
22. Share-based payments to employees
The Group makes equity settled share-based payments in respect of services received from its employees. The fair value of the services 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 employees provide services, which is generally 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. Vesting conditions,
service or performance conditions, are not taken into account in estimating fair value, but may lead to adjustments to 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.
Vesting conditions that are related to market conditions are reflected in the fair value of the awards granted and 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 employee 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, which 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. Withholding taxes are also
treated as income taxes. Income tax recoverable on tax allowable losses is recognised as a current tax asset only to the extent that it is regarded as
recoverable by offset against 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. Deferred 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 three months or less. 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.
204 Barclays PLC Annual Report 2010 www.barclays.com/annualreport10