Barclays 2003 Annual Report Download - page 181

Barclays PLC Annual Report 2003 179
61 Differences between UK GAAP and US GAAP accounting principles (continued)
UK GAAP
Compensation arrangements
Where shares are purchased, the difference between the purchase price
and any contribution made by the employee is charged to the profit and
loss account in the period to which it relates. Where shares are issued, or
options granted, the charge made to the profit and loss account is the
difference between the fair value at the time the award is made and any
contribution made by the employee. For these purposes fair value is
equal to the intrinsic value of the option.
Non-share-based compensation arrangements awarded to employees
where no performance criteria, other than continued service, are
required to be met, are accrued fully on the date of grant.
Fair value of securities
Positions in investment debt securities and investment equity shares are
stated at cost less provision for diminution in value. The cost of dated
investment securities is adjusted for the amortisation of premiums or
discount on purchase. Investment securities are those intended for use
on a continuing basis by the Group.
Foreign exchange on investment debt securities
Movements resulting from changes in foreign currency exchange rates
are reflected in the profit and loss account.
Loan origination
Fee income relating to the origination of loans is recognised in the profit
and loss account to match the cost over the period in which the service
is provided, together with a reasonable profit margin.
Costs associated with loan origination, for example incentives in the
form of cashbacks and discounts, are written off as incurred as permitted
by the British Bankers Association Statement of Recommended Practice
(SORP) on Advances.
Dividend payable
Dividends declared after the period end are recorded in the period to
which they relate.
Taxation
Profit before tax and the tax charge for the year includes tax at the
effective rate on certain transactions including the shareholders’ interest
in the long-term assurance fund.
Acceptances
Acceptances are bills that the drawee has agreed to pay. They are not
recorded within the balance sheet.
US GAAP
The Group adopted SFAS 123 which encourages the adoption of
accounting for share compensation schemes, based on their estimated fair
values at the date of the grant. Accordingly, the Group charges this fair
value to the profit and loss account over the period to their vesting dates.
Non-share-based compensation arrangements awarded to employees
where no performance criteria, other than continued service, are
required to be met, are accrued evenly over the period of grant to date
of payout.
Under SFAS 115, debt and marketable equity securities are classified as
one of three types. Trading securities are carried at fair value with
changes in fair value taken through profit and loss; where there is the
ability and intent to hold to maturity, such securities are recorded at
amortised cost (only debt securities may be held to maturity);
and those held for continuing use in the business, but available
for sale, which are carried at the fair value with movements in fair
value recorded in shareholders’ equity, unless any losses constitute
an other-than-temporary impairment difference, in which case the
change is reflected in the profit and loss account.
Non-marketable securities held by investment companies are carried at
fair value with movements in fair value recorded in net income.
Under EITF 96-15, as amended by SFAS 133, the change in value of
available for sale debt securities as a result of changes in foreign
currency exchange rates is reflected in shareholders’ equity.
SFAS 91 requires loan origination fees and incremental direct costs of
loan origination to be deferred and amortised over the life of the loan as
an adjustment to interest income.
Dividends are recorded in the period in which they are declared.
Income before tax and the tax charge do not include such adjustments
for tax.
Acceptances and the related customer liabilities are recorded within the
balance sheet.