Barclays 2005 Annual Report Download - page 266

Barclays PLC
Annual Report 2005
264
Notes to the accounts
For the year ended 31st December 2005
63 Differences between IFRS and US GAAP accounting principles (continued)
IFRS US GAAP
Guarantees
All financial guarantees (other than credit derivatives) are initially
recognised in the financial statements at fair value on the date that the
guarantee was given.
Classification of debt and equity
From 1st January 2005, certain subordinated instruments issued by the
Group are treated as equity under IFRS where they contain no present
obligation to deliver cash or another financial asset to a holder. If these
are held in foreign currency, the instrument is translated into the
reporting currency at the exchange rate ruling on the date of issuance.
Non-financial instruments
Purchased financial guarantees may be carried at fair value with
changes in fair value recognised in the income statement.
Taxation
Profit before tax and the tax charge includes tax at the effective tax rate
on certain transactions.
Under IFRS the deferred tax asset on share compensation schemes is
calculated using the intrinsic value at the exercise date.
Earnings per share
Basic earnings per share (EPS) is net income divided by the weighted
average shares in issue during the period. Diluted EPS reflects the effect
that potential ordinary shares in the form of existing options would have
on the basic EPS if they were to be exercised, by increasing the number
of ordinary shares and adjusting income where appropriate.
Acceptances
Acceptances are bills that the drawee has agreed to pay. They are not
recognised on the balance sheet.
Non-cash collateral
Where a transferee sells collateral pledged to it, IFRS requires
recognition of the proceeds from the sale and a liability measured at fair
value for its obligation to return the collateral.
Netting
Financial assets and liabilities are offset and reported net 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, or to realise an asset and settle the liability simultaneously.
Under FIN 45, only guarantees issued or modified from 1st January
2003 are recognised at inception at fair value as a liability on the
balance sheet.
The subordinated instruments issued by the Group which are treated as
equity under IFRS are treated as debt instruments under US GAAP and
are translated at the rate ruling at the balance sheet date.
All purchased financial guarantees not meeting the definition of a
derivative are measured on an accrual basis.
Income before tax and the tax charge do not include such tax
adjustments.
The deferred tax asset on share compensation schemes is calculated
using the fair value of options, with reference to the number of options
expected to exercise.
The basic and diluted US GAAP EPS differs from IFRS EPS only to the
extent that net income under US GAAP differs.
Acceptances and the related customer liabilities are recognised on the
balance sheet.
Where a transferee receives collateral that it has a right to on sell or on
pledge, a liability is recognised when the collateral is received.
US GAAP permits netting in relation to long and short positions in
securities and derivative assets and liabilities subject to a master
netting agreement.