Barclays 2003 Annual Report Download - page 180

Notes to the Accounts
For the Year Ended 31st December 2003
178
61 Differences between UK GAAP and US GAAP accounting principles (continued)
UK GAAP
Leasing – lessor
Gross earnings under finance leases are allocated in such a way as to give
a constant periodic rate of return on the (post-tax) net cash investment.
Leasing – lessee
In accordance with FRS 5 and SSAP 21, leases are categorised as finance
leases when the substance of the agreement is that of a financing
transaction and the lessee assumes substantially all of the risks and
benefits relating to the asset. All other leases are categorised as
operating leases.
Deferred tax
Prior to 1st January 2002 deferred tax was recognised using the liability
method on timing differences that have originated but not reversed at
the balance sheet date.
Following the introduction of FRS 19, deferred tax is provided in full in
respect of timing differences which have not reversed at the balance
sheet date.
Revaluation of property
Property is carried either at original cost or at subsequent valuation less
related depreciation, calculated on the revalued amount where
applicable. Prior to 1st January 2000, revaluation surpluses were taken
directly to shareholders’ funds, with deficits below cost, less any related
depreciation, included in attributable profit.
Following the introduction of FRS 15, the revalued book amounts are
retained without subsequent revaluation subject to the requirement
to test for impairment.
Depreciation is charged on the cost or revalued amounts of freehold and
long-leasehold properties over their estimated useful economic lives.
Shareholders’ interest in the retail long-term assurance fund
The value of the shareholders’ interest in the retail long-term assurance
fund represents an estimate of the net present value of the profits
inherent in the in-force policies.
Disposal of investments
Exchange rate translation differences, which arise in respect of foreign
currency denominated investments, are included in the carrying value of
the investment and are also accumulated in the reserves in the
consolidated accounts. The profit or loss on any disposal is calculated by
comparing the net proceeds with the then carrying value of the
investment.
US GAAP
Application of SFAS 13 gives rise to a level rate of return on the
investment in the lease, but without taking into account tax payments
and receipts. This results in income being recognised in different periods
than under UK GAAP, the magnitude of the difference depending upon
the value and average age of the leasing portfolio at each period end.
Leases are classified as capital leases when any of certain criteria are
met as outlined under SFAS 13. All other leases are classified as
operating leases.
Under SFAS 109, a liability method is also used, but deferred tax assets
and liabilities are calculated for all temporary differences. A valuation
allowance is raised against a deferred tax asset where it is more likely
than not that some portion of the deferred tax asset will not be realised.
Revaluations of property are not permitted under US GAAP.
Freehold and long-leasehold property is depreciated over its estimated
useful economic life based on the historical cost.
The net present value of the profits inherent in the in-force life and
pensions policies of the long-term assurance fund is not recognised by
the Group under US GAAP. An adjustment is made for the amortisation
of acquisition costs and fees in accordance with SFAS 60 and SFAS 97.
SFAS 52 requires similar treatment of exchange rate translation
differences, except that, on disposal, cumulative exchange rate
translation differences, which have previously been taken to reserves, are
reversed and reported as part of the profit or loss on sale of the
investment.