Barclays 2012 Annual Report Download - page 55

Committee responsibilities and how they were discharged in 2012
The Committee is responsible for:
 monitoring the integrity of the Group’s financial reporting and
satisfying itself that any significant financial judgements made by
management are sound;
 monitoring the Group’s internal controls, including internal financial
controls; and
 monitoring and reviewing the activities and performance of the
internal and external auditor, including monitoring their
independence and objectivity.
You can obtain the Committee’s full terms of reference on the
corporate governance section of Barclays website.
The Committee met 10 times in 2012 and the chart opposite shows the
way in which we allocated our time. Committee meetings were
attended by management, including the Group Chief Executive, Group
Finance Director, Chief Internal Auditor, Chief Risk Officer and General
Counsel, as well as representatives from the businesses and other
functions from time to time. The external auditor attended each
meeting and the Committee held regular private sessions with the
Chief Internal Auditor and the external auditor, which were not
attended by management. These private sessions allowed us to discuss
matters directly with the audit teams.
The main matters and areas of judgement we reviewed and considered
during 2012 were as follows:
Financial Reporting and Significant Financial Judgements
With the support of the external auditor, the Committee assessed
whether suitable accounting policies had been adopted, whether
management had made appropriate estimates and judgements and
whether disclosures were balanced and fair. The main areas of focus in
2012 and matters where we specifically considered the judgements
that had been made are set out below:
 We considered the presentation of the financial statements and in
particular, the presentation of adjusted performance and the
adjusting items, including own credit, provisions for product
mis-selling redress and the gain on the disposal of Barclays interest in
BlackRock, Inc. We discussed the treatment of the LIBOR penalties
and agreed with management’s judgement that these should not be
treated as an adjusting item;
 We received reports on the assumptions underlying the provisions
made for product mis-selling redress, specifically PPI and Interest
Rate Hedging Products. The trend in PPI claims has proved to be
volatile during 2012, resulting in provisions being taken in both the
first quarter and the third quarter. A provision for Interest Rate
Hedging Products was taken at the half-year. We were content after
due challenge and debate with the assumptions made and the
judgements applied. As part of reviewing the results for 2012, we
considered a recommendation from management that further
provisions should be taken in respect of PPI and Interest Rate
Hedging Products in the financial results for 2012 and, having
reviewed the trend data and provisioning assumptions, agreed with
management’s recommendation;
 In reviewing the results for 2012, we reviewed the assessments made
for goodwill impairment and confirmed, based on management’s
expectations of future performance of certain businesses, that no
goodwill impairment charges were required in 2012;
 We also reviewed the judgements made in respect of tax, in
particular, deferred tax assets in Spain and the US, including their
recoverability. We supported management’s assumptions, based on
current forecasts. We reviewed the level of tax provisioning in light
of ongoing discussions with HMRC. We believe that the current
level of provisions is reasonable;
 At the request of the Board we considered whether the 2012
Annual Report was fair, balanced and understandable and whether
it provided the necessary information for shareholders to assess
Barclays performance, business model and strategy. We were
satisfied that, taken as a whole, the Annual Report is fair, balanced
and understandable;
 We reviewed the Group’s credit impairment charges, which have
reduced overall in 2012, to satisfy ourselves with the
appropriateness of the provision;
 We received reports from the Investment Bank Valuations
Committee on the processes followed and the judgements made in
valuing certain asset classes, in particular, those assets where there
is little or no market data. We were content with the rigour of the
processes and the resulting valuations;
 Given ongoing uncertainties in the Eurozone, we reviewed and
agreed enhanced disclosure of Barclays exposures in selected
Eurozone countries, including sovereign debt exposures, and
Barclays disclosures in respect of re-denomination risk for certain
countries;
 We reviewed disclosures on litigation and competition and
regulatory matters contained in Barclays full and half-year results
and trading statements, in particular, the statements made with
respect to investigations by the Financial Services Authority, Serious
Fraud Office, US Department of Justice, and the US Securities and
Exchange Commission’s investigation into Barclays relationships
with third parties who assist it to win or retain business. We also
reviewed the disclosure made in respect of civil claims made in
connection with Barclays role in the setting of interbank offered
rates; and
 We received an update on future accounting standards changes
and the potential impact that these may have on Barclays financial
statements, particularly the impact of IFRS 10 Consolidated
Financial Statements and IAS 19 Employee Benefits. Some of these
new accounting standards will apply for the financial year 2013 and
we will continue to assess the impact on our financial statements.
Internal control
To discharge our responsibility to review the effectiveness of the
Group’s internal controls, we received specific control environment
reviews from each of the businesses, we reviewed control issues of
Group level significance and specific control issues and also received
regular reports on regulatory and compliance matters. Some of the
specific matters we reviewed in 2012 are set out below:
 We reviewed the control environment of each of our principal
businesses: Europe RBB; UKRBB; Africa; Investment Bank;
Barclaycard; Corporate Banking; and Wealth and Investment
Management. Given the planned integration of Absa and Barclays
Africa, which is a major change programme, we were particularly
concerned to understand the potential impact on resources in
those businesses as they integrate and automate and standardise
processes and controls;
 Technology remained an area of specific focus in 2012, particularly
in view of a number of well-publicised IT failures at certain banks
and the impact of such failures on business continuity. We regularly
reviewed specific IT-related control issues and also the progress of
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