Barclays 2011 Annual Report Download - page 213

7 Credit impairment charges and impairment on available for sale assets continued
As at 30 September 2011, an impairment charge of £1,800m was recognised resulting from an assessment that there was objective evidence that the
Group’s available for sale equity investment in BlackRock, Inc. was impaired. The impairment reflects the recycling through the income statement of the
cumulative reduction in market value previously recognised in the available for sale reserve, since the Group’s acquisition of its holding in BlackRock, Inc.
as part of the sale of Barclays Global Investors on 1 December 2009. The fair value of the holding at 31 December 2011 was £4.1bn and the £0.7bn
increase in the value of the investment since 30 September 2011 has been recognised in the available for sale reserve.
Critical accounting estimates and judgements
The calculation of the impairment allowance involves the use of judgement, based on the Group’s experience of managing credit risk.
Within the retail and small businesses portfolios, which comprise large numbers of small homogeneous assets with similar risk characteristics where
credit scoring techniques are generally used, statistical techniques are used to calculate impairment allowances on a portfolio basis, based on historical
recovery rates and assumed emergence periods. These statistical analyses use as primary inputs the extent to which accounts in the portfolio are in
arrears and historical information on the eventual losses encountered from such delinquent portfolios. There are many such models in use, each tailored
to a product, line of business or customer category. Judgement and knowledge is needed in selecting the statistical methods to use when the models
are developed or revised. The impairment allowance reflected in the financial statements for these portfolios is therefore considered to be reasonable
and supportable. The impairment charge reflected in the income statement for these retail portfolios is £2,422m (2010: £3,296m; 2009: £3,919m) and
amounts to 64% (2010: 59%; 2009: 53%) of the total impairment charge on loans and advances in 2011.
For individually significant assets, impairment allowances are calculated on an individual basis and all relevant considerations that have a bearing on the
expected future cash flows are taken into account (for example, the business prospects for the customer, the realisable value of collateral, the Group’s
position relative to other claimants, the reliability of customer information and the likely cost and duration of the work-out process). The level of the
impairment allowance is the difference between the value of the discounted expected future cash flows (discounted at the loan’s original effective
interest rate), and its carrying amount. Subjective judgements are made in the calculation of future cash flows. Furthermore, judgements change with
time as new information becomes available or as work-out strategies evolve, resulting in frequent revisions to the impairment allowance as individual
decisions are taken. Changes in these estimates would result in a change in the allowances and have a direct impact on the impairment charge. The
impairment charge reflected in the financial statements in relation to wholesale portfolios is £1,368m (2010: £2,329m; 2009: £3,439m) and amounts to
36% (2010: 41%; 2009: 47%) of the total impairment charge on loans and advances. Further information on impairment allowances and related credit
information is set out within the Credit Risk Management section.
8 Administration and general expenses
2011
£m
2010
£m
2009
£m
Property and equipment 1,763 1,813 1,641
Outsourcing and professional services 1,869 1,705 1,496
Operating lease rentals 659 637 639
Marketing, advertising and sponsorship 585 631 492
Communications, subscriptions, publications and stationery 740 750 695
Travel and accommodation 328 358 273
Other administration and general expenses 400 566 263
Impairment of property, equipment and intangible assets (excluding goodwill) 12 125 61
Administration and general expenses 6,356 6,585 5,560
Barclays PLC Annual Report 2011 www.barclays.com/annualreport 211
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