Barclays 2004 Annual Report Download - page 203

Barclays PLC Annual Report 2004
201
52 Differences between UK GAAP and US GAAP accounting principles (continued)
UK GAAP
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.
Earnings per share
Basic earnings per share (EPS) is net income per weighted average
share in issue. Diluted EPS reflects the effect that existing options
would have on the basic EPS if they were to be exercised, by increasing
the number of ordinary shares.
Acceptances
Acceptances are bills that the drawee has agreed to pay. They are not
recorded within the balance sheet.
Transfer and servicing of financial assets
Under FRS 5, where a transaction involving a previously recognised
asset transfers to others (a) all significant rights or other access
to benefits relating to that asset and (b) all significant exposure
to the risks inherent in those benefits, the entire asset should cease
to be recognised.
Netting
Under FRS 5, items should be aggregated into a single item where
there is a right to insist on net settlement and the debit balance
matures no later than the credit balance.
Investment contracts
In accordance with FRS 5, certain products offered to institutional
pension funds are accounted for as investment products when the
substance of the investment is that of managed funds. The assets and
related liabilities are excluded from the consolidated balance sheet.
US GAAP
Income before tax and the tax charge do not include such adjustments
for tax.
The basic EPS under US GAAP differs to the extent that income under
US GAAP differs. In addition, the diluted EPS differs as the increased
shares are reduced by the number of shares that could be bought
(using the average market price over the year) with the assumed
exercise proceeds (actual proceeds arising on exercise plus
unamortised compensation costs, where appropriate). Any options
that are antidilutive are excluded from this calculation.
Acceptances and the related customer liabilities are recorded within
the balance sheet.
Under SFAS 140, control passes where the following criteria are met:
(a) the assets are isolated from the transferor (the seller), i.e. they are
beyond the reach of the transferor, even in bankruptcy or other
receivership; (b) the transferee (the buyer) has the right – free of any
conditions that constrain it from taking advantage of the right – to
pledge or exchange the assets, and (c) the transferor does not
maintain effective control over the transferred assets.
Transfers of assets not deemed as sales cause a gross-up of the
balance sheet to show the assets transferred as remaining on the
balance sheet. In addition, non-cash collateral received on certain
stock lending transactions results in a balance sheet gross-up under
the provisions of SFAS 140.
Under FASB interpretation No. (FIN) 39, netting is only permitted
where there is a legal right of set-off and an intention to settle on a
net basis. In addition, under FIN 41, repurchase and reverse repurchase
agreements may only be netted where they have the same explicit
settlement date specified at the inception of the agreement.
Netting presentation differences exist between UK and US GAAP in
relation to repurchase and reverse repurchase agreements, securities
lending and borrowing agreements, receivables and payables in
respect of unsettled trades, long and short securities, and cash
collateral held against derivatives.
Where the legal form of these products is similar to insurance
contracts, they are accounted for in accordance with SFAS 97.
Accordingly, the assets and liabilities are recorded on the
balance sheet.