Barclays 2005 Annual Report Download - page 261

Barclays PLC
Annual Report 2005 259
3.5
62 First-time adoption of International Financial Reporting Standards (IFRS) (continued)
Differences between UK GAAP and IFRS
Effects of the application of IAS 32, IAS 39 and IFRS 4
UK GAAP IFRS
(o) Classification and measurement of financial instruments
(continued)
(p) Netting
Under FRS 5, items are 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.
(q) Capital instruments
Under FRS 4, capital instruments are classified as debt if they contain an
obligation, including a contingent obligation, to transfer economic
benefits to another party.
Investment securities and equity shares are generally classified as
available for sale.
The best evidence of the fair value of a financial instrument at initial
recognition is the transaction price, unless the fair value of that
instrument is evidenced by comparison with other observable current
market transactions in the same instrument or is based on a valuation
technique whose variables include only data from observable markets.
At 1st January 2005, financial instruments have been classified and
measured in accordance with IAS 39. In general, financial instruments
included in the trading book under UK GAAP have been classified as
held for trading, banking book loans and receivables have been
classified as loans or receivables and investment securities have been
classified as available for sale.
In addition, the fair value of certain trading derivatives has been restated
to eliminate any profits recognised that are not evidenced by reference
to data from observable markets.
Financial assets and liabilities are offset and the net amount reported in
the balance sheet if, and only if, there is currently a legally enforceable
right to set off the recognised amounts and there is an intention to
settle on a net basis at all times, or to realise the asset and settle the
liability simultaneously.
The application of IFRS has resulted in certain transactions that
qualified for netting under UK GAAP, being presented on a gross basis
from 1st January 2005. The primary differences include derivative assets
and liabilities subject to master netting agreements, repurchase
contracts and cash collateral balances.
Issued financial instruments are classified as liabilities where the
substance of the contractual arrangement results in the Group having a
present obligation to either deliver cash or another financial asset to the
holder. In the absence of such an obligation, the financial instrument is
classified as equity.
The application of IFRS has resulted in certain funding instruments that
were included in undated loan capital under UK GAAP being reclassified
as equity from 1st January 2005. Where the instruments have been
reclassified, they have been remeasured to net proceeds at the date
of issue and the subsequent foreign currency movements have
been eliminated.