Barclays 2006 Annual Report Download - page 164

operates, to Governmental and other plans which have the
characteristics of defined contribution plans.
For defined benefit schemes, actuarial valuation of each of the scheme’s
obligations using the projected unit credit method and the fair valuation
of each of the scheme’s assets are performed annually, using the
assumptions set out in Note 35. The difference between the fair value of
the plan assets and the present value of the defined benefit obligation at
the balance sheet date, adjusted for any historic unrecognised actuarial
gains or losses and past service cost, is recognised as a liability in the
balance sheet. An asset, arising for example, as a result of past over
funding or the performance of the plan investments, is recognised to
the extent that it does not exceed the present value of future
contribution holidays or refunds of contributions.
Cumulative actuarial gains and losses in excess of the greater of 10% of
the 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.
For defined contribution schemes, the Group recognises contributions
due in respect of the accounting period in the income statement. Any
contributions unpaid at the balance sheet date are included as a liability.
The Group also provides health care to certain retired employees, which
are accrued as a liability in the financial statements over the period of
employment, using a methodology similar to that for defined benefit
pensions plans.
Short-term employee benefits, such as salaries, paid absences, and
other benefits, are accounted for on an accruals basis over the period
which employees have provided services in the year. Bonuses are
recognised to the extent that the Group has a present obligation to its
employees that can be measured reliably.
All expenses related to employee benefits are recognised in the income
statement in staff costs, which is included within operating expenses.
22. Share-based payments to employees
The Group engages in equity settled share-based payment transactions
in respect of services received from certain of its employees. The fair
value of the services received is measured by reference to the fair value
of the shares or share options granted on the date of the grant. The cost
of the employee services received in respect of the shares or share
options granted is recognised in the income statement over the period
that the services are received, which is the vesting period. The fair value
of the options granted is determined using option pricing models,
which take into account the exercise price of the option, the current
share price, the risk free interest rate, the expected volatility of the share
price over the life of the option and other relevant factors. Except for
those which include terms related to market conditions, vesting
conditions included in the terms of the grant are not taken into account
in estimating fair value. Non-market vesting conditions are taken into
account by adjusting the number of shares or share options included in
the measurement of the cost of employee services so that ultimately,
the amount recognised in the income statement reflects the number of
vested shares or share options. Where vesting conditions are related to
market conditions, the charges for the services received are recognised
regardless of whether or not the market related vesting condition is met,
provided that the non-market vesting conditions are met.
23. Provisions
Provisions are recognised for present obligations arising as
consequences of past events where it is more likely than not that a
transfer of economic benefit will be necessary to settle the obligation,
and it can be reliably estimated.
When a leasehold property ceases to be used in the business or a
demonstrable commitment has been made to cease to use a property
where the costs exceed the benefits of the property, provision is made,
where the unavoidable costs of the future obligations relating to the
lease are expected to exceed anticipated rental income and other
benefits. The net costs are discounted using market rates of interest
to reflect the long-term nature of the cash flows.
Provision is made for the anticipated cost of restructuring, including
redundancy costs when an obligation exists. An obligation exists when
the Group has a detailed formal plan for restructuring a business and
has raised valid expectations in those affected by the restructuring
by starting to implement the plan or announcing its main features.
The provision raised is normally utilised within nine months.
Contingent liabilities are possible obligations whose existence will be
confirmed only by uncertain future events or present obligations where
the transfer of economic benefit is uncertain or cannot be reliably
measured. Contingent liabilities are not recognised but are disclosed
unless they are remote.
24. Taxes, including deferred taxes
Income tax payable on taxable profits (‘current tax’), is recognised
as an expense in the period in which the profits arise. Income tax
recoverable on tax allowable losses is recognised as an asset only to
the extent that it is regarded as recoverable by offset against current
or future taxable profits.
Deferred income tax is provided in full, using the liability method, on
temporary timing differences arising from the differences between the
tax bases of assets and liabilities and their carrying amounts in the
consolidated financial statements. Deferred income tax is determined
using tax rates and legislation enacted or substantially enacted by the
balance sheet date and is expected to apply when the deferred tax asset
is realised or the deferred tax liability is settled. Deferred and current
tax assets and liabilities are only offset when they arise in the same tax
reporting group and where there is both the legal right and the intention
to settle on a net basis or to realise the asset and settle the liability
simultaneously.
25. Segment reporting
Business segments are distinguishable components of the Group that
provide products or services that are subject to risks and rewards that are
different to those of other business segments. Geographical segments
provide products or services within a particular economic environment
that is subject to risks and rewards that are different to those of
components operating in other economic environments. Business
segments are the primary reporting segments. Group costs are allocated
to segments on a reasonable and consistent basis. Transactions between
segments are generally accounted for in accordance with Group policies
as if the segment were a stand-alone business with intra-segment
revenue and costs being eliminated in Head office.
The analyses by geographical segment is based on the location of
the customer.
26. Cash and cash equivalents
For the purposes of the cash flow statement, cash comprises cash on
hand and demand deposits, and cash equivalents comprise highly liquid
investments that are convertible into cash with an insignificant risk of
changes in value with original maturities of less than three months.
Trading balances, repos and reverse repos are not considered to be part
of cash equivalents.
27. Trust activities
The Group commonly acts as trustees and in other fiduciary capacities
that result in the holding or placing of assets on behalf of individuals,
trusts, retirement benefit plans and other institutions. These assets and
income arising thereon are excluded from these financial statements, as
they are not assets of the Group.
Consolidated accounts Barclays PLC
Accounting policies
Barclays PLC
Annual Report 2006
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