Barclays 2011 Annual Report Download - page 228

Notes to the financial statements
For the year ended 31 December 2011 continued
20 Fair value of financial instruments continued
Comparison of carrying amounts and fair values
The following table summarises the carrying amounts of financial assets and liabilities presented on the Group’s balance sheet where the carrying
amount is not a reasonable approximation of fair value.
2011 2010
Carrying
amount
£m
Fair
value
£m
Carrying
amount
£m
Fair
value
£m
Financial assetsa
Loans and advances to banks 47,446 47,446 37,799 37,768
Loans and advances to customers:
– Home loans 171,272 163,433 168,055 161,439
– Credit cards, unsecured and other retail lending 64,492 63,482 59,269 58,944
– Wholesale 196,170 190,408 200,618 196,124
Reverse repurchase agreements and other similar secured lending 153,665 153,365 205,772 205,527
Financial liabilitiesb
Deposits from banks 91,116 91,137 77,975 77,949
Customer accounts:
– Current and demand accounts 116,208 116,208 110,443 110,443
– Savings accounts 93,160 93,160 91,928 91,928
– Other time deposits 156,664 156,689 143,417 143,580
Debt securities in issue 129,736 128,997 156,623 155,974
Repurchase agreements and other similar secured lending 207,292 207,292 225,534 225,511
Subordinated liabilities 24,870 20,745 28,499 27,183
Valuation inputs
IFRS 7 Financial Instruments: Disclosure requires an entity to classify its financial instruments held at fair value according to a hierarchy that reflects the
significance of observable market inputs. The classification of a financial instrument is based on the lowest level input that is significant to the fair value
measurement in its entirety. The three levels of the fair value hierarchy are defined below.
Quoted market prices – Level 1
Financial instruments are classified as Level 1 if their value is observable in an active market. Such instruments are valued by reference to unadjusted
quoted prices for identical assets or liabilities in active markets where the quoted price is readily available, and the price represents actual and regularly
occurring market transactions on an arm’s length basis. An active market is one in which transactions occur with sufficient volume and frequency to
provide pricing information on an ongoing basis.
This category includes liquid government bonds actively traded through an exchange or clearing house, actively traded listed equities and actively
exchange-traded derivatives.
Valuation technique using observable inputs – Level 2
Financial instruments classified as Level 2 have been valued using models whose inputs are observable in an active market. Valuations based on
observable inputs include financial instruments such as swaps and forwards which are valued using market standard pricing techniques, and options
that are commonly traded in markets where all the inputs to the market standard pricing models are observable.
This category includes most investment grade and liquid high yield bonds, certain asset backed securities, US agency securities, government bonds,
less actively traded listed equities, bank, corporate and municipal obligations, certain OTC derivatives, certain convertible bonds, certificates of deposit,
commercial paper, collateralised loan obligations (CLOs), most commodities based derivatives, credit derivatives, certain credit default swaps (CDSs),
most fund units, certain loans, foreign exchange spot and forward transactions and certain issued notes.
Notes
a The carrying value of financial assets measured at amortised cost (including loans and advances, and other lending such as reverse repurchase agreements and cash collateral on
securities borrowed) is determined in accordance with the accounting policy noted on pages 238 to 239. Fair value is determined using discounted cash flows, applying market derived
interest rates. Alternatively, the fair value is determined by applying an average of available regional and industry segmental credit spreads to the loan portfolio, taking the contractual
maturity of the loan facilities into consideration.
b The carrying value of financial liabilities measured at amortised cost (including customer accounts and other deposits such as repurchase agreements and cash collateral on securities
lent, debt securities in issue and subordinated liabilities) is determined in accordance with the accounting policy noted on page 238. Fair values of other debt securities in issue are based
on quoted prices where available, or where these are unavailable, are estimated using a valuation model. Fair values for dated and undated convertible and non convertible loan capital are
based on quoted market rates for the issue concerned or similar issues with terms and conditions.
226 Barclays PLC Annual Report 2011 www.barclays.com/annualreport