Barclays 2004 Annual Report Download - page 198

Notes to the accounts
For the year ended 31st December 2004
196
52 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). 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 for acquisitions prior to 1st January 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.
Pensions
In respect of defined benefit schemes, consistent with the
requirements of SSAP 24, the assets are assessed at fair value, while
the projected liabilities are discounted to a present value at a long-
term interest rate reflecting the expected return on the scheme’s
assets. Any variation between the SSAP 24 calculation described above
and the amount held on the Bank’s balance sheet is 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
along with an allowance for risk and expense costs.
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 initially recognised at fair value. An intangible
asset with a finite useful life is amortised over the period for which it
contributes to the future cash flows of the entity. An intangible asset
with an indefinite useful life is not amortised, but is tested annually for
impairment or more frequently if events or changes in circumstances
indicate that its carrying value may not be recoverable.
In respect of defined benefit schemes, the same actuarial calculation
approach is used under SFAS 87 as under UK GAAP, but to comply
with the relevant standards, differences arise in certain assumptions
and methodologies and in the measurement date adopted for
calculation purposes. In particular, under SFAS 87, assets are assessed
at a fair value and the present value of the projected liabilities are
assessed at a current settlement rate as at a measurement date of
30th September each year. The current settlement rate for this
purpose reflects the yield on high-quality corporate bonds as at the
measurement date. Variations between the funded status of the
scheme and the amount held on the Bank’s balance sheet falling
outside of the allowable corridor under SFAS 87 are allocated over
the average remaining service lives of current employees.
For defined contribution schemes, SFAS 87 provides for the same
treatment as under UK GAAP.