Barclays 2004 Annual Report Download - page 199

Barclays PLC Annual Report 2004
197
52 Differences between UK GAAP and US GAAP accounting principles (continued)
UK GAAP
Post-retirement benefits
Where appropriate, post-retirement benefits are assessed actuarially
on a similar basis to pension liabilities under SSAP 24 and are
discounted at a long-term rate. Variations from regular cost are
expressed as a percentage of payroll and spread over the average
remaining service lives of current eligible employees.
Where an actuarial basis is not appropriate, provisions are recognised
for present obligations arising as consequences of past events where
it is probable that a transfer of economic benefit will be necessary
to settle the obligation and it can be reliably estimated.
Leasing – lessor
Gross earnings under finance leases are allocated to accounting periods
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 that have originated but not reversed
at the balance sheet date. Deferred tax assets are recognised to the
extent that it is regarded as more likely than not that they will be
recoverable.
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.
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.
US GAAP
Under SFAS 106, there are certain differences in the actuarial method
used and variations in the computation of regular cost as compared
with UK GAAP.
Where an actuarial basis is not appropriate the treatment is the same
as under UK 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 certain criteria are met
as outlined under SFAS 13. All other leases are classified as
operating leases.
Under SFAS 109, a liability method is 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.
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.
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.