Barclays 2006 Annual Report Download - page 260

Notes to the accounts
For the year ended 31st December 2006
Barclays PLC
Annual Report 2006
256
60 Differences between IFRS and US GAAP accounting principles (continued)
Applicable developments in US GAAP
SFAS 155: Accounting for Certain Hybrid Financial Instruments
In February 2006, the FASB issued Statement of Financial Accounting Standards No. 155 (SFAS 155), an amendment to SFAS 140 and SFAS 133.
SFAS 155 permits entities to elect to measure at fair value through earnings any hybrid financial instrument that contains an embedded derivative
that would otherwise require bifurcation. This fair value election is made on an instrument-by-instrument basis and is irreversible. It is available for
all hybrid instruments that exist as of the date of adoption of the standard as well as new instruments issued or acquired after the date of adoption.
SFAS 155 eliminates a prior restriction on certain passive types of derivatives that a qualifying special purpose entity is expected to hold.
As permitted by SFAS 155, the Group has adopted the fair value election from 1st January 2006. The impact of the adoption of SFAS 155 is a credit
to retained earnings of £251m (£176m net of tax) comprising gross losses of £267m and gross gains of £518m, determined on an instrument
by instrument basis.
For additional information on SFAS 155, see Note (k) on page 268.
SFAS 123-R: Accounting for Stock-Based Compensation
Statement of Financial Accounting Standards No. 123 (R) (SFAS 123-R) was issued on 16th December 2004. SFAS 123-R requires that entities
recognise an expense for employee stock options and other forms of stock-based compensation based on the fair value of the options.
The statement applies as of the beginning of the interim or annual reporting period starting after 15th June 2005. Barclays has adopted SFAS 123-R
using Modified Prospective Application where SFAS 123-R applies to new awards and to awards modified, repurchased, or cancelled after
1st January 2006. Adoption did not have a material impact on the Group’s results of operations or financial condition as determined under US GAAP
for the year ended 31st December 2006.
SFAS 154: Accounting Changes and Error Corrections
Statement of Financial Accounting Standards No. 154 (SFAS 154) issued in May 2005 replaces APB 20 and SFAS 3 and changes the requirements
for the accounting and reporting of a change in accounting principle. This statement applies to all voluntary changes in accounting principle, and
requires the retrospective application to prior periods’ financial statements of such changes.
SFAS 154 also requires that a change in depreciation, amortisation or depletion method for long-lived non-financial assets be accounted for as a
change in accounting estimate affected by a change in accounting principle. SFAS 154 carries forward without change the guidance in Opinion 20
for reporting the correction of an error in previously issued financial statements.
The statement is effective for accounting changes and correction of errors made in fiscal years beginning after 15th December 2005, although it has
not been applicable to Barclays.
SFAS 158: Employers’ Accounting for Defined Benefit Pension and Other Post-retirement Plans
The standard requires the recognition in the statement of financial performance of the overfunded or underfunded status of a defined benefit post-
retirement plan measured as the difference between the fair value of plan assets and the benefit obligation.
Actuarial gains and losses and prior period service costs and credits are recognised as a component of other comprehensive income and taken to
income under the recognition and amortisation provisions of SFAS 87 and SFAS 106. Defined benefit plan assets and defined benefit plan obligations
are required to be measured at the date of the statement of financial position. Additional information is required to be disclosed on certain effects on
net periodic benefit cost that arise from delayed recognition of the actuarial gains and losses and the prior service costs and credits.
The requirement to recognise the funded status of a defined benefit post-retirement plan and the related disclosure requirements is effective for
fiscal years ending after 15th December 2006. Retrospective application is not required.
The Group has adopted the recognition provisions of SFAS 158 as at 31st December 2006. The impact of adoption for the Group’s defined benefit
pension schemes is an increase in other liabilities of £860m, a decrease in other assets of £25m and a decrease in other comprehensive income of
£885m. Associated deferred tax assets have increased by £258m and deferred tax liabilities have decreased by £8m.
The adoption of the recognition provisions for the Groups post-retirement benefit schemes has resulted in an increase in other liabilities of £66m
and a decrease in other comprehensive income of £66m. Associated deferred tax assets have increased by £20m.
For a public entity that measures plan assets and benefit obligations as of a date other than the date of its statement of position, the requirement
to change that date to year-end reporting date is applied for fiscal years ending after 15th December 2008 and shall not be applied retrospectively.
Earlier application is encouraged. Barclays is considering applying the change in measurement date from 30th September to 31st December for the
UKRF and certain post-retirement benefit schemes in 2007.
The expected impact of adoption of the measurement provisions of SFAS 158 for the Group’s pension schemes as at 1st January 2007 is a decrease
in retained earnings of approximately £35m, a decrease in other liabilities of approximately £350m and an increase in other comprehensive income
of approximately £390m as at 1st January 2007.
The impact of adoption of the measurement provisions of SFAS 158 on the Group’s post retirement benefit schemes is not expected to be significant
as at 1st January 2007.
For additional information on SFAS 158 see Note (c) on page 261.