Barclays 2003 Annual Report Download - page 203

Barclays PLC Annual Report 2003 201
61 Differences between UK GAAP and US GAAP accounting principles (continued)
(u) Guarantees (continued)
Standby letters of credit
These are irrevocable commitments to pay a third party, on behalf of our customers, the value of which on demand is subject to certain criteria being
complied with. Any amounts paid are debited to the customers accounts. These contracts are used when required in substitution of guarantees due
to a greater acceptability in the beneficiary country.
Other guarantees
This category includes the following types of contracts:
Performance guarantees – a guarantee given by the bank on behalf of a customer, undertaking to pay a certain sum if our customer has failed to
carry out the terms or certain terms of the contract.
Advance payment guarantees – enables the beneficiary to demand repayment of an advance in funds in certain circumstances.
Tender guarantees – provided during a tender process to lend support to a customer’s commitment to a tender process.
Customs and Excise – guarantees provided to HM Customs and Excise to cover a customer’s liability, most commonly for import duties.
Retention guarantees – similar to advance payments but are used to secure early release of retained contract payments.
The following table provides the maturity analysis of guarantees issued by the Group. The amounts disclosed represent the maximum potential
amount of future payments (undiscounted) the Group could be required to make under the guarantee, before any recovery through recourse or
collaterisation provisions.
Less than One to Four to Over
one year three years five years five years Total
£m £m £m £m £m
Financial guarantees 16,838 945 308 721 18,812
Standby letters of credit 3,951 805 865 163 5,784
Other guarantees 6,455 920 690 362 8,427
Credit card guarantees
Under the Consumer Credit Act of 1974, Barclays may be liable to customers to refund payments made for unsatisfactory goods or services or
unfulfilled contracts where payment was made through a credit card. The maximum liability that Barclays could have is the total credit limits
marked to customers of £32,734m (2002: £29,208m). These limits are included within commitments with a maturity of less than one year, as the
limit can be revoked at any time.
Warranties and indemnities given as part of acquisition and disposal activity
Warranties and indemnities are routinely provided to counterparties as part of the terms and conditions required in a business acquisition, disposal
or investing in joint ventures. Most commonly, these relate to indemnification against tax liabilities arising from pre-transaction activities. Usually
the total liability in respect of warranties and indemnities for a transaction is capped and the maximum exposure under these is £4,000m
(2002: £4,100m). No collateral or recourse to third parties is generally available.
Certain derivative contracts
In addition to the contracts described above, there are certain derivative contracts to which the Group is a counterparty that meet the characteristics
of a guarantee under FIN 45. These derivatives are recorded in the Group’s balance sheet at fair value under US GAAP.
Included in other provisions for liabilities and charges is £nil (2002: £4m) in respect of guarantees. The Group considers the amounts provided in the
balance sheet represent a reasonable estimate of amounts actually anticipated to be paid under such arrangements.
(v) Total assets
The adjustments to total assets arising from the GAAP differences dealt with in the tables on page 185, and Notes (p) and (q) amounted to £3,677m
(2002: £6,202m). Additional adjustments arise due to further differences in GAAP, as set out below.
In accordance with ARB No. 43, Barclays PLC shares shown for UK GAAP within Other assets in Note 23 have been netted against US GAAP
shareholders’ equity.