Barclays 2005 Annual Report Download - page 258

62 First-time adoption of International Financial Reporting Standards (IFRS) (continued)
Differences between UK GAAP and IFRS
UK GAAP IFRS
(e) Share-based payment
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 intrinsic value.
(f) Pensions and other post-retirement benefits
Pension costs, based on actuarial assumptions, are calculated so as to
allocate the cost of providing benefits over the average remaining
service lives of the employees.
(g) Intangible assets other than goodwill
The Group writes off the cost of computer software unless the software
is required to facilitate the use of new hardware. Capitalised amounts
are included with the hardware within Fixed assets.
(h) Financial guarantees
Credit related instruments (other than credit derivatives) are treated
as contingent liabilities and these are not shown on the balance sheet
unless, and until, the Group is called upon to make a payment under the
instrument. Fees received for providing these instruments are taken to
profit over the life of the instrument and reflected in fees and
commissions receivable.
An annual charge is made in the income statement for share
options and other share-based payments based on the fair value of
options granted or shares awarded on the date of the grant or award.
This charge is spread over the period the employees’ services are
received, which is the vesting period. The fair value of options granted
is determined using option pricing models.
For defined benefit schemes, an actuarial valuation of the scheme
obligation and the fair value of the plan assets are made annually and
the difference between fair value of the plan assets and the present
value of the defined benefit obligation at the balance sheet date,
together with adjustments for any unrecognised actuarial losses and
past service cost is recognised as a liability in the balance sheet.
Cumulative actuarial gains and losses in excess of the greater of 10% of
the plan assets or 10% of the obligations of the plan are recognised in
the income statement over the remaining average service lives of the
employees of the related plan, on a straight-line basis.
At 1st January 2004, pension assets and liabilities have been recognised
in full.
IFRS requires the capitalisation of both external and directly related
internal costs where the software will result in a directly measurable
intangible asset. Amounts capitalised are amortised over their
estimated useful lives. Computer software is amortised at a rate
of 20-33% per year.
Where software developed is not integral to the related hardware, the
costs are classified as an intangible asset.
At 1st January 2004, qualifying amounts previously written off under
UK GAAP have been recognised as intangible assets and the 2004
income statement has been adjusted accordingly.
For acquisitions arising after 1st January 2004, intangible assets which
are required to be recognised separately from goodwill in accordance
with IFRS 3 have been transferred from goodwill to intangible assets as
at the date of acquisition.
Intangible assets acquired before 1st January 2004 have been
reclassified from goodwill to intangible assets.
Financial guarantees (other than credit derivatives) are initially
recognised in the financial statements at fair value on the date that the
guarantee was given. Subsequent to initial recognition, the Group’s
liabilities under such guarantees are measured at the higher of the initial
measurement, less amortisation calculated to recognise in the income
statement the fee income earned over the period, and the best estimate
of the expenditure required to settle any financial obligation arising as a
result of the guarantees at the balance sheet date.
Barclays PLC
Annual Report 2005
256
Notes to the accounts
For the year ended 31st December 2005