Barclays 2003 Annual Report Download - page 179

Barclays PLC Annual Report 2003 177
61 Differences between UK GAAP and US GAAP accounting principles
The accounts presented in this report have been prepared in accordance with accounting principles generally accepted in the UK (UK GAAP). Such
principles vary in significant respects from those generally accepted in the United States (US GAAP). Preparing the financial statements requires
management to make estimates and assumptions that affect reported income, expenses, assets and liabilities and disclosures of contingent assets and
liabilities. Actual results could be different from those estimates. The significant differences applicable to the Group’s accounts are summarised below.
UK GAAP
Goodwill
Goodwill arising on acquisitions of subsidiary and associated
undertakings and joint ventures is capitalised and amortised through
the profit and loss account over its expected useful economic life
(with a maximum of 20 years). Capitalised goodwill is written off when
judged to be irrecoverable. Prior to December 1998, goodwill was
charged directly against reserves in accordance with SSAP 22. In the
event of a subsequent disposal, any goodwill previously charged directly
against reserves will be written back and reflected in the profit or
loss on disposal.
Intangible assets
Intangible assets are recognised under UK GAAP only if they are
separately identifiable and can be disposed of without disposing
of a business of the entity.
Intangible assets are reviewed for impairment at the end of the first full
financial year following acquisition and thereafter when events or
changes indicate that the carrying values may not be recoverable.
Pensions
In respect of defined benefit schemes, pension fund assets are assessed
actuarially at the present value of the expected future investment
income, which is consistent with SSAP 24. Most liabilities are discounted
at a long-term interest rate and variations from regular cost are
allocated over the expected average remaining service lives of current
employees.
For defined contribution schemes the net pension cost recognised in the
profit and loss account represents the contributions payable to the
scheme, in accordance with SSAP 24.
Post-retirement benefits
Where appropriate, post-retirement health care liabilities are assessed
actuarially on a similar basis to pension liabilities under SSAP 24 and are
discounted at a long-term rate. Variations from regular cost are
expressed as a percentage of payroll and spread over the average
remaining service lives of current eligible employees.
Where an actuarial basis is not appropriate, provisions are recognised for
present obligations arising as consequences of past events where it is
probable that a transfer of economic benefit will be necessary to settle
the obligation and it can be reliably estimated.
US GAAP
Prior to 1st January 2002, goodwill was capitalised and amortised over
its useful economic life under the provisions of APB16.
SFAS 141 and SFAS 142 require intangible assets to be separately
identified, no amortisation to be charged on goodwill balances and
goodwill balances to be reviewed at least annually for impairment.
US GAAP can require the recognition of certain assets and liabilities that
would either not be recognised or have a different measurement value
under UK GAAP. This will lead to a different value of goodwill for US
purposes.
Intangible assets are recognised as an asset apart from goodwill if they
arise from contractual or other legal rights regardless of whether these
rights are transferable or separable from the acquired entity or from
other rights and obligations. If an intangible asset does not arise from
contractual or other legal rights it is recognised only if it is capable of
being separated.
Intangible assets are reviewed for impairment whenever events or
changes in circumstances indicate that its carrying value may not
be recoverable.
In respect of defined benefit schemes, the same basic actuarial method
is used under SFAS 87 as under UK GAAP, but certain assumptions differ,
assets are assessed at fair value and liabilities are assessed at current
settlement rates. Certain variations from regular cost are allocated in
equal amounts over the average remaining service lives of current
employees.
For defined contribution schemes SFAS 87 provides for the same
treatment as under UK GAAP.
Under SFAS 106, there are certain differences in the actuarial method
used and variations in the computation of regular cost as compared
with UK GAAP.
Where an actuarial basis is not appropriate the treatment is the same as
under UK GAAP.