Barclays 2003 Annual Report Download - page 185

Barclays PLC Annual Report 2003 183
61 Differences between UK GAAP and US GAAP accounting principles (continued)
Applicable developments in US GAAP
SFAS 143: Accounting for Asset Retirement Obligations
In June 2001, the FASB issued SFAS No. 143 ‘Accounting for Asset Retirement Obligations’. SFAS 143 requires a provision to be raised for the legal
obligation in relation to the other-than-temporary removal of a tangible fixed asset, at fair value, when incurred. The Standard was effective for the
Group from 1st January 2003. Adoption did not have a material effect on the Group’s financial condition or results of operations as determined under
US GAAP.
SFAS 146: Accounting for costs associated with exits or disposals
In June 2002, the FASB issued SFAS No. 146 ‘Accounting for Costs Associated with Exits or Disposals’. SFAS 146 addresses the financial accounting
and reporting for costs associated with exit or disposal activities and requires that the fair value of a liability for a cost associated with an exit
or disposal activity be recognised when the liability is incurred and nullifies EITF 94-3 which requires the recognition of a liability at the date
of an entity’s commitment to an exit plan. SFAS 146 is effective from 1st January 2003 and was adopted by the Group during the year ended
31st December 2003. Adoption did not have a material effect on the Group’s financial condition or results of operations as determined under
US GAAP.
EITF Issue 02-03: Issues involved in accounting for derivative contracts held for trading purposes and contracts involved in Energy Trading
and Risk Management activities
The principal requirement affecting the Group is that, for energy derivative contracts with effect from July 2002 and non-energy contracts with effect
from 21st November 2002, where the fair value is not determined using either observable market prices or models which use market-observable
variables as inputs, the unrealised gain or loss at inception on new contracts should not be recognised.
Adoption did not have a material effect on the Group’s financial condition or results of operations as determined under US GAAP in 2002. The impact
in 2003 is reflected in Note 61(o) on page 195.
FIN 45: Guarantor’s accounting and disclosure requirements for guarantees, including indirect guarantees of indebtedness of others
In November 2002, the FASB issued FASB Interpretation No. 45 ‘Guarantor’s accounting and disclosure requirements for guarantees, including
indirect guarantees of indebtedness of others’. FIN 45 requires a liability to be recognised for all obligations assumed under guarantees issued and
requires disclosure by guarantors in respect of guarantees issued (including guarantees embedded in other contracts). The disclosure requirements
are effective for periods ending after 15th December 2002 and are reflected on pages 200 to 201 in this report. The measurement requirements are
effective for guarantees issued from 1st January 2003 and were adopted by the Group during the year ended 31st December 2003. The impact in
2003 on net income of £(8)m is shown on page 185.
FIN 46: Consolidation of variable interest entities
In January 2003, the FASB issued FIN 46 ‘Consolidation of Variables Interest Entities’, as an interpretation of Accounting Research Bulletin No. 51,
‘Consolidated Financial Statements’. This was revised in December 2003 and reissued as FIN 46-R. FIN 46 addresses consolidation of variable interest entities
(‘VIEs’) by parties holding variable interests in these entities. An entity is considered a VIE if the equity investment at risk is not sufficient to permit the entity
to finance its activities without additional subordinated financial support or if the equity investors lack one of three characteristics of a controlling financial
interest. First, the equity investors lack the ability to make decisions about the entity’s activities through voting rights or similar rights. Second, they do not
bear the obligation to absorb the expected losses of the entity if they occur. Lastly, they do not claim the right to receive expected returns of the entity if they
occur, which is the compensation for the risk of absorbing the expected losses.
FIN 46 requires that VIEs be consolidated by the interest holder exposed to the majority of the entity’s expected losses or residual returns, that is, the
primary beneficiary.
In accordance with the transition provisions of FIN 46, the Group adopted FIN 46 immediately for all VIEs created or acquired after 31st January 2003 and
as at 31st December 2003 consolidates certain asset securitisation entities described in Note 61(p) on page 196. The Group will adopt FIN 46-R for all VIEs in
2004. Disclosures in relation to the nature, size and potential maximum loss in relation to other VIEs created or acquired before 1st February 2003 where it is
reasonably possible the Group will consolidate these entities on adoption of FIN 46-R, or where the Group is not the primary beneficiary but has a significant
variable interest are reflected in Note 61(p) of this report.