Barclays 2004 Annual Report Download - page 216

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Notes to the accounts
For the year ended 31st December 2004
52 Differences between UK GAAP and US GAAP accounting principles (continued)
(i) Revaluation of property
In 1990, £449m of property revaluation reserve was capitalised by the issue of bonus shares.
(j) Loan impairment and disclosure
SFAS 114 applies only to impaired loans, the measurement of which is based upon the present value of expected future cash flows discounted at
the loan’s effective interest rate, the loan’s observable market value, or the fair value of the collateral if the loan is collateral dependent. Smaller
balance homogeneous consumer loans that are collectively evaluated for impairment are outside the scope of SFAS 114, as are debt securities
and leases. At 31st December 2004, the element of impaired loans outside the scope of SFAS 114 amounted to £2,599m (2003: £2,605m).
In accordance with SFAS 114, the Group’s total impaired loans being non-performing, less impaired loans outside the scope of SFAS 114, amount
to £1,386m at 31st December 2004 (2003: £1,700m). Credit risk provisions of £721m, estimated in accordance with SFAS 114, were held against
these loans (2003: £762m). The average level of such impaired lendings in 2004 was £1,736m (2003: £1,832m).
Where cash received represents the realisation of security, or there is doubt regarding the recovery of a loan, such receipts are treated as
repayments of the loan principal. Otherwise, cash received in respect of impaired loans is recognised as interest income. Estimated interest
income which was recognised in 2004 on impaired loans within the scope of SFAS 114 was £24m (2003: £18m).
SFAS 114 modifies the accounting for in-substance foreclosure, in that collateralised debts where the Group takes physical possession of the
collateral, regardless of formal insolvency procedures, would be reclassified as if the collateral had been acquired for cash. At 31st December
2004, under US GAAP, the amount of collateral recorded at the lower of the book value of the debt or the fair value of the collateral that would
be reclassified as ‘other real estate owned’ was £7m (2003: £11m) and as debt and equity instruments was £34m (2003: £48m).
Mortgage loans of £3,482m are included within loans and advances to customers which are held with the intention of resale (2003:£nil).
During the year £4,762m of loans were sold (2003: £645m) generating a net profit of £31m (2003: net loss of £10m).
(k) Business combination
In 2002, Barclays and Canadian Imperial Bank of Commerce completed the combination of their retail, corporate and offshore banking operations
and created FirstCaribbean International Bank. Under both UK and US GAAP, Barclays accounts for the resulting interest as an associate. The
transaction generated a gain of £206m under both UK and US GAAP, the gain being recorded through the Statement of Total Recognised Gains
and Losses for UK GAAP under UITF 31 but in the income statement account under US GAAP (APB 29 and EITF 01-02). The net assets of the
business transferred by Barclays to the new entity were not materially different under US GAAP.
In 2004, an adjustment of £13m (2003: £(4)m) was made to the gain of £206m, also recognised under UK GAAP in the Statement of Total Recognised
Gains and Losses.
(l) Provisions for restructuring of business
During 2004, 2003 and 2002, the Group has continued its existing programmes to reduce the workforce. Costs under these programmes, in all
three years, have primarily been incurred in UK Retail Banking, UK Business Banking and Private Clients and International. The restructuring
programmes are largely focused on activities within the UK involving a reshaping of the Group’s operations through the centralisation of core
processes and the application of new technologies.
The Group does not currently have any restructuring programmes which have to be accounted under SFAS 146 ‘Accounting for Costs Associated with
Exit or Disposal Activities’.