Barclays 2011 Annual Report Download - page 226

Notes to the financial statements
For the year ended 31 December 2011 continued
18 Available for sale financial assets
Accounting for available for sale financial assets
Available for sale financial assets are held at fair value with gains and losses being included in other comprehensive income. The Group uses this
classification for assets that are not derivatives and are not held for trading purposes or otherwise designated at fair value through profit or loss, or
at amortised cost. Dividends and interest (calculated using the effective interest method) are recognised in the income statement in net interest
income (Note 3) or, net investment income (Note 6). On disposal, the cumulative gain or loss recognised in other comprehensive income is also
included in net investment income.
For impairment of available for sale debt and equity investments, see Note 7, Credit impairment charges and impairment on available for sale assets.
2011
£m
2010
£m
Debt securities and other eligible bills 63,610 59,629
Equity securities 4,881 5,481
Available for sale financial investments 68,491 65,110
Critical accounting estimates and judgements
Approximately US$4.2bn (£2.7bn) of the assets acquired as part of the 2008 acquisition of the North American business of Lehman Brothers had not
been received by 31 December 2011. Approximately US$3.0bn (£2.0bn) of this amount was recognised as part of the acquisition accounting and is
included as an available for sale asset in the balance sheet. As discussed in Note 31, Barclays entitlement to these assets was the subject of legal
proceedings in the United States Bankruptcy Court for the Southern District of New York (the Court) between the SIPA Trustee for Lehman Brothers Inc.
(the Trustee) and Barclays. On 22 February 2011, the Court issued its Opinion in relation to the legal proceedings deciding some of the claims in the
Trustee’s favour and some in favour of Barclays. On 15 July 2011, the Court entered final Orders implementing its Opinion. The final Orders provide that
Barclays is not entitled to receive approximately US$2.4bn (£1.6bn), and is only conditionally entitled to receive approximately US$0.8bn (£0.5bn),
of the undelivered assets. In addition, the final Orders provide that Barclays is not entitled to approximately US$2.1bn (£1.3bn) of assets it had
already received.
Barclays and the Trustee have each filed a notice of appeal from the Court’s adverse rulings. There continues to be significant judgement involved in the
valuation of this asset and uncertainty relating to the outcome of the appeal process. The Group takes the view that the effective provision of US$1.2bn
(£0.8bn) that is reflected in its estimate of fair value is appropriate. If the final Orders were to be unaffected by the appeals, Barclays estimates that after
taking into account the US$1.2bn (£0.8bn) effective provision, its loss would be approximately US$4.3bn (£2.8bn). The valuation of this asset will be
kept under review as legal proceedings progress.
19 Financial liabilities designated at fair value
Accounting for liabilities designated at fair value through profit and loss
In accordance with IAS 39, financial liabilities may be designated at fair value, with gains and losses taken to the income statement within net
trading income (Note 5) and net investment income (Note 6). The Group has the ability to do this when holding the instruments at fair value
reduces an accounting mismatch (caused by an offsetting liability or asset being held at fair value), is managed by the Group on the basis of its fair
value, or includes terms that have substantive derivative characteristics (Note 17, Derivative financial instruments).
2011 2010
Fair value
£m
Contractual
amount due
on maturity
£m
Fair value
£m
Contractual
amount due
on maturity
£m
Debt securities 66,565 70,787 76,907 81,589
Deposits 10,755 11,422 10,243 10,950
Liabilities to customers under investment contracts 1,681 – 1,947 –
Other financial liabilities 8,996 9,561 8,632 9,533
Financial liabilities designated at fair value 87,997 91,770 97,729 102,072
The cumulative own credit net gain that has been recognised is £3,600m at 31 December 2011 (2010: £892m).
224 Barclays PLC Annual Report 2011 www.barclays.com/annualreport