Barclays 2009 Annual Report Download - page 195

www.barclays.com/annualreport09 Barclays PLC Annual Report 2009 193
Consolidated accounts Barclays PLC
Accounting policies
Significant accounting policies
1. Reporting entity
These financial statements are prepared for the Barclays PLC Group under
Section 399 of the Companies Act 2006. The Group is a major global
financial services provider engaged in retail and commercial banking, credit
cards, investment banking, wealth management and investment
management services. In addition, individual financial statements have
been prepared for the holding company, Barclays PLC (the Company),
under Section 397 of the Companies Act 2006.
Barclays PLC is a public limited company, incorporated in England and
Wales having a registered office in England and is the holding company of
the Group.
2. Compliance with International Financial Reporting Standards
The consolidated financial statements of the Barclays PLC Group, and
the individual financial statements of Barclays PLC, have been prepared
in accordance with International Financial Reporting Standards (IFRS)
and interpretations issued by the International Financial Reporting
Interpretations Committee (IFRIC), as published by the International
Accounting Standards Board (IASB). They are also in accordance with
IFRS and IFRIC interpretations as adopted by the European Union.
The principal accounting policies applied in the preparation of the
consolidated and individual financial statements are set out below. These
policies have been consistently applied. Changes in accounting policy are
set out on page 203.
3. Basis of preparation
The consolidated and individual financial statements have been prepared
under the historical cost convention modified to include the fair valuation
of investment property, certain financial instruments and contracts to buy
or sell non-financial items and trading inventories to the extent required
or permitted under accounting standards and as set out in the relevant
accounting polices. They are stated in millions of pounds Sterling (£m),
the currency of the country in which Barclays PLC is incorporated.
Critical accounting estimates
The preparation of financial statements in accordance with IFRS requires
the use of certain critical accounting estimates. It also requires management
to exercise judgement in the process of applying the accounting policies.
The notes to the financial statements set out areas involving a higher degree
of judgement or complexity, or areas where assumptions are significant to
the consolidated and individual financial statements such as fair value of
financial instruments (Note 50), allowance for impairment (Note 47),
goodwill (Note 21), intangible assets (Note 22), retirement benefit
obligations (Note 30), derecognition of financial assets (Note 29), taxation
(Note 10) and credit risk (Note 47).
4. Consolidation
Subsidiaries
The consolidated financial statements combine the financial statements of
Barclays PLC and all its subsidiaries, including certain special purpose entities
(SPEs) where appropriate, made up to 31st December. Entities qualify as
subsidiaries where the Group has the power to govern the financial and
operating policies of the entity so as to obtain benefits from its activities,
generally accompanying a shareholding of more than one half of the voting
rights. The existence and effect of potential voting rights that are currently
exercisable or convertible are considered in assessing whether the Group
controls another entity. Details of the principal subsidiaries are given in Note 41.
SPEs are consolidated when the substance of the relationship between
the Group and that entity indicates control. Potential indicators of control
include, amongst others, an assessment of the Group’s exposure to the risks
and benefits of the SPE.
This assessment of risks and benefits is based on arrangements in place
and the assessed risk exposures at inception. The initial assessment is
reconsidered at a later date if:
a) the Group acquires additional interests in the entity;
b) the contractual arrangements of the entity are amended such that the
relative exposure to risks and benefits change; or
c) if the Group acquires control over the main operating and financial
decisions of the entity.
Subsidiaries are consolidated from the date on which control is
transferred to the Group and cease to be consolidated from the date that
control ceases.
The acquisition method of accounting is used to account for the
purchase of subsidiaries. The cost of an acquisition is measured at the fair
value of the assets given, equity instruments issued and liabilities incurred
or assumed, plus any costs directly related to the acquisition.
The excess of the cost of an acquisition over the Group’s share of the
fair value of the identifiable net assets acquired is recorded as goodwill.
See accounting policy 14 for the accounting policy for goodwill. A gain on
acquisition is recognised in profit or loss if there is an excess of the Group’s
share of the fair value of the identifiable net assets acquired over the cost
of the acquisition. Intra-group transactions and balances are eliminated
on consolidation and consistent accounting policies are used throughout
the Group for the purposes of the consolidation.
As the consolidated financial statements include partnerships where
a Group member is a partner, advantage has been taken of the exemption
under Regulation 7 of the Partnerships (Accounts) Regulations 2008 with
regard to the preparation and filing of individual partnership financial
statements.
In the individual financial statements, investments in subsidiaries are
stated at cost less impairment, if any.
Associates and joint ventures
An associate is an entity in which the Group has significant influence, but
not control, over the operating and financial management policy decisions.
This is generally demonstrated by the Group holding in excess of 20%, but
no more than 50%, of the voting rights.
A joint venture exists where the Group has a contractual arrangement
with one or more parties to undertake activities typically, though not
necessarily, through entities which are subject to joint control.
Unless designated as at fair value through profit and loss as set out in
policy 7, the Group’s investments in associates and joint ventures are initially
recorded at cost and increased (or decreased) each year by the Group’s