Barclays 2008 Annual Report Download - page 45

1
Business review
Barclays PLC Annual Report 2008 43
transaction evidenced by an active market or recent transactions for
similar assets. Value in use is calculated by discounting the expected
future cash flows obtainable as a result of the asset’s continued use,
including those resulting from its ultimate disposal, at a market-based
discount rate on a pre-tax basis. The most significant amounts of
intangible assets relate to the GRCB – Absa and Lehman Brothers North
American businesses.
Retirement benefit obligations
The Group provides pension plans for employees in most parts of the
world. Arrangements for staff retirement benefits vary from country to
country and are made in accordance with local regulations and customs.
For defined contribution schemes, the pension cost recognised in the
profit and loss account represents the contributions payable to the
scheme. 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 in
accordance with the requirements of IAS 19.
The actuarial valuation is dependent upon a series of assumptions,
the key ones being interest rates, mortality, investment returns and
inflation. Mortality estimates are based on standard industry and national
mortality tables, adjusted where appropriate to reflect the Group’s own
experience. The returns on fixed interest investments are set to market
yields at the valuation date (less an allowance for risk) to ensure
consistency with the asset valuation. The returns on UK and overseas
equities are based on the long-term outlook for global equities at the
calculation date having regard to current market yields and dividend
growth expectations. The inflation assumption reflects long-term
expectations of both earnings and retail price inflation.
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. To the extent that any unrecognised gains or losses at the
start of the measurement year in relation to any individual defined benefit
scheme exceed 10% of the greater of the fair value of the scheme assets
and the defined benefit obligation for that scheme, a proportion of the
excess is recognised in the income statement.
The Group’s IAS 19 pension deficit across all schemes as at
31st December 2008 was £1,287m (2007: surplus of £393m).
There are net recognised liabilities of £1,292m (2007: £1,501m)
and unrecognised actuarial gains of £5m (2007: £1,894m). The net
recognised liabilities comprised retirement benefit liabilities of £1,357m
(2007: £1,537m) and assets of £65m (2007: £36m).
The Group’s IAS 19 pension deficit in respect of the main UK scheme
as at 31st December 2008 was £858m (2007: surplus of £668m).
Among the reasons for this change were the large loss in value of the
assets over the year, and to a lesser extent the strengthening of the
allowance made for future improvement in mortality. Offsetting these
were the increase in the AA long-term corporate bond yields which
resulted in a higher discount rate of 6.75% (2007: 5.82%), a decrease in
the inflation assumption to 3.16% (2007: 3.45%) and contributions paid.
Further information on retirement benefit obligations, including
assumptions, is set out in Note 30 to the accounts on page 234.