Barclays 2005 Annual Report Download - page 183

Barclays PLC
Annual Report 2005 181
3.5
28 Intangible assets
2005
Internally Core
generated Other deposit Customer Licences
software software intangibles Brands lists and other Total
£m £m £m £m £m £m £m
Cost or valuation
At 1st January 2005 138 5 – – 36 53 232
Acquisitions as a result of business combinations – 9 288 172 524 10 1,003
Additions 6823–––82173
Exchange and other adjustments (18) 6 18 11 22 (6) 33
At 31st December 2005 188 43 306 183 582 139 1,441
Accumulated amortisation and impairment
At 1st January 2005 (84) (3) – – (2) (4) (93)
Amortisation charge for year (20) (3) (7) (9) (27) (13) (79)
Impairment charge (5) (3) – – – (1) (9)
Exchange and other adjustments 19 (9) – – – (1) 9
At 31st December 2005 (90) (18) (7) (9) (29) (19) (172)
Net book value 98 25 299 174 553 120 1,269
2004
Internally Core
generated Other deposit Customer Licences
software software intangibles Brands lists and other Total
£m £m £m £m £m £m £m
Cost or valuation
At 1st January 2004 111––––15126
Acquisitions/disposals as a result of
business combinations – 3 ––––3
Additions 47 2 – – 36 38 123
Exchange and other adjustments (20) – – – – – (20)
At 31st December 2004 138 5 – – 36 53 232
Accumulated amortisation and impairment
At 1st January 2004 (61) ––––(1)(62)
Amortisation charge for year (19) ––––(3)(22)
Impairment charge (9) –––––(9)
Exchange and other adjustments 5 (3) – – (2) – –
At 31st December 2004 (84) (3) – – (2) (4) (93)
Net book value 54 2 – – 34 49 139
The Group recognised £991m of intangible assets in relation to the Absa acquisition. The Absa brand has a carrying value of £174m as at
31st December 2005 and is being amortised over a period of ten years.
The discount rate used in the intangible asset valuations for Absa was based on the cost of equity adjusted for risk and ranges from 13.7% to 16.1%.
In the case of brands, the pre-tax royalty rates were estimated to be 1.5% based on similar financial services transactions, information about
marketing expenditure on the brands and consideration of the unique factors relating to the brand that third parties would consider. Cash flows for
customer lists were based on historic revenues and customer numbers adjusted for expected attrition and taking account of applicable costs to
determine expected margins. These margins varied, depending on the nature of the customer relationships. A similar approach was applied to core
deposit intangibles with cash flows being calculated by charging an appropriate cost to the identified spread, on a historical margins basis. In all the
calculations, the rate of tax was estimated to be 31.6% of operating profit.
Impairment charges on internally generated and other software reflect impairment of certain capitalised IT assets following a review of the future
economic benefits likely to be generated by them.
Barclays had a collaborative arrangement in South Africa with Standard Bank. Following the Group’s acquisition of a majority stake in Absa, Barclaycard
and Standard Bank agreed terms for Barclaycard’s exit from the arrangement leading to the impairment of the unamortised portion of the licence.
Impairment charges detailed above have been included within other operating expenses.