Barclays 2005 Annual Report Download - page 136

Consolidated accounts Barclays PLC
Accounting policies
Significant Accounting Policies
1. Reporting entity
These financial statements are prepared for the Barclays PLC Group
(‘Barclays’ or ‘the Group’) under Section 227(2) of the Companies Act
1985. The Group is an international financial services group engaged in
the provision of a wide range of financial services, including banking,
investment banking, venture capital and asset management. In
addition, individual financial statements have been prepared for the
holding company, Barclays PLC (‘the Company’), under Section
226(2)(b) of the Companies Act 1985.
Barclays PLC is a public limited company, incorporated in England and
Wales and having a registered office in England and Wales.
2. Compliance with International Financial Reporting Standards
The consolidated financial statements of the Barclays PLC Group and
the individual financial statements of Barclays PLC, have been prepared
in accordance with International Financial Reporting Standards (IFRS)
and interpretations issued by the International Financial Reporting
Interpretations Committee (IFRIC) as adopted by the European Union.
In all material respects, this is also in accordance with full IFRS.
The principal accounting policies applied in the preparation of the
consolidated and separate financial statements are set out below.
These policies have been consistently applied, except for the first-time
application of IFRS relating to financial instruments and insurance
contracts for which the 2004 comparatives have been prepared in
accordance with UK generally accepted accounting principles (UK
GAAP) as permitted by IFRS 1 and as is described in more detail in
the relevant accounting polices.
In addition, the disclosure provisions of amendment to IAS 19
‘Employee Benefits – Actuarial Gains and Losses, Group Plans and
Disclosures’ have been adopted from 1st January 2004. The other
provisions of the amendment have not changed any accounting
policies applied to Barclays PLC Group or Barclays PLC individual
statements.
3. Basis of preparation
The consolidated and individual financial statements have been
prepared under the historical cost convention as modified to include
the fair valuation of certain financial instruments and contracts to buy
or sell non-financial items and trading inventories to the extent
required or permitted under accounting standards and as set out in the
relevant accounting polices. They are stated in millions of pounds
Sterling, (£m), the currency of the country in which Barclays PLC
is incorporated.
Critical accounting estimates
The preparation of financial statements in accordance with IFRS
requires the use of certain critical accounting estimates. It also requires
management to exercise judgement in the process of applying the
accounting policies. The notes to the financial statements set out areas
involving a higher degree of judgement or complexity, or areas where
assumptions are significant to the consolidated and individual financial
statements such as fair value of financial instruments (Note 57), loan
loss impairment (Note 18), goodwill (Note 27), intangible assets
(Note 28) and retirement benefit obligations (Note 38).
4. First-time application of IFRS
The Group has applied IFRS in its financial reporting with effect from
1st January 2004, the date of transition, in accordance with the
transitional provisions set out in IFRS 1, ‘First-time Adoption of
International Financial Reporting Standards’. Previously, the Group
followed UK accounting standards issued by the UK Accounting
Standards Board and the pronouncements of its Urgent Issues Task
Force, Statements of Recommended Practice issued by the British
Bankers Association and by the Finance and Leasing Association, and
the accounting requirements of the Companies Act 1985 (collectively,
‘UK GAAP’). The Group has used the provisions of IFRS 1 in arriving
at appropriate opening balances for the purposes of these financial
statements, as follows:
Goodwill
The Group has not applied IFRS 3, ‘Business Combinations’
retrospectively to business combinations prior to the date of transition.
The carrying amount of goodwill in the UK GAAP balance sheet as at
31st December 2003 has accordingly been brought forward without
adjustment.
Property, plant and equipment
The Group has adopted the carrying values under UK GAAP of all items
of property, plant and equipment at the date of transition as their
deemed cost rather than either reverting to historical cost or carrying
out a valuation as permitted by IFRS 1.
Cumulative foreign currency difference
The Group has brought forward a nil opening balance on the
cumulative foreign currency translation adjustment arising from the
retranslation of foreign operations, which is shown as a separate item
in shareholders’ equity at the date of transition in accordance with IAS
21 ‘The Effects of Changes in Foreign Exchange Rates’.
Employee benefits
For defined benefit pension schemes and other post-retirement
benefits, the Group has recognised all cumulative actuarial gains and
losses at the date of transition.
Derecognition of financial assets and liabilities
The Group has elected not to re-recognise financial assets and
liabilities derecognised before 1st January 2004.
Share-based payment
The Group has applied the requirements of IFRS 2 to grants of
shares and share options whether they were granted before or after
7th November 2002.
5. First-time application of IFRS relating to Financial Instruments
and Insurance Contracts
In addition to the options described above, IFRS 1 also includes specific
transitional provisions for International Accounting Standard 32,
‘Financial Instruments, Disclosure and Presentation’, International
Accounting Standard 39, ‘Financial Instruments – Recognition and
Measurement’ and International Financial Reporting Standard 4,
‘Insurance Contracts’. The Group has decided to adopt these provisions
and therefore has not applied these standards to the 2004 comparatives.
The impact of these standards is reflected through further adjustments
to shareholders’ equity as at 1st January 2005. In the 2004 comparatives,
financial instruments and insurance contracts are included using the
measurement bases and the disclosure requirements of UK GAAP
relating to financial instruments and insurance contracts.
6. Effect of the transition to IFRS
A description of the differences between UK GAAP and IFRS
accounting policies is set out in Note 62 to the accounts.
Reconciliations of balance sheets prepared under UK GAAP and IFRS at
1st January 2004 and 31st December 2004 are included in Note 62 to
the accounts. Reconciliations of the profit and loss account prepared in
accordance with UK GAAP and prepared in accordance with IFRS for
Barclays PLC
Annual Report 2005
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