Barclays 2006 Annual Report Download - page 258

Notes to the accounts
For the year ended 31st December 2006
Barclays PLC
Annual Report 2006
254
60 Differences between IFRS and US GAAP accounting principles (continued)
IFRS US GAAP
Loans held for sale
Financial instruments are measured as required by IAS 39 and are
outside the scope of the measurement provisions of IFRS 5.
Non-financial instruments
Purchased financial guarantees may be carried at fair value with changes
in fair value recognised in the income statement.
Disposal of foreign subsidiaries, associates and joint ventures
Under IAS 21 the exchange differences arising on the translation of a
foreign operation are included in cumulative translation reserves within
shareholders’ equity and recycled to the income statement on disposal
or partial disposal of the operation. Under the transition rules contained
within IFRS 1 the requirement applies to translation currency gains and
losses arising after 1st January 2004.
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-based compensation
schemes is calculated using the intrinsic value of outstanding share
awards at the balance sheet date. The associated income tax credit is
capped by the fair value of the award multiplied by the statutory tax rate,
any excess is recorded in reserves.
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 of exchange that the drawee has agreed
responsibility for payment. 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 SOP 06-1 once a decision has been made to sell loans not
previously classified as held for sale, such loans are transferred into the
held-for-sale classification and carried at the lower of cost or fair value.
At the time of the transfer into the held-for-sale classification, any
amount by which cost exceeds fair value is accounted for as a
valuation allowance.
All purchased financial guarantees not meeting the definition of
a derivative are measured on an accrual basis.
The requirements outlined in SFAS 52 in relation to translation gains
and losses of a foreign operation are the same as IAS 21. However, the
requirements apply to all gains and losses arising from acquisition of
the foreign operation.
Income before tax and the tax charge do not include such tax
adjustments.
The deferred tax asset on share compensation schemes is calculated
on the fair value of share awards on the date of issue, with adjustments
made for the number of options expected to exercise. Deferred tax
excesses or shortfalls are only taken to reserves upon exercise of
an award.
The basic and diluted US GAAP EPS differs from IFRS EPS to the
extent that net income under US GAAP differs and the windfall tax
benefit/deficiency to be recognised in additional paid in capital
is included in the assumed proceeds used to determine the number
of potential ordinary shares.
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 between two counterparties.