Barclays 2010 Annual Report Download - page 196

1 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). Barclays PLC is a public
limited company, incorporated and domiciled 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 IFRS 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 205.
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 policies. They are stated in millions of pounds Sterling (£m), the
functional currency of Barclays PLC.
Critical accounting estimates
The preparation of financial statements in accordance with IFRS requires the use of estimates. It also requires management to exercise judgement in
applying the accounting policies. Note 45 (Critical accounting estimates) sets out the key areas involving a higher degree of judgement or complexity,
or areas where assumptions are significant to the consolidated and individual financial statements.
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 perating 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 32. 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 consideration transferred for the acquisition of a
subsidiary is measured at the fair value of the assets given, equity instruments issued and liabilities incurred or assumed.
The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition related
costs are expensed as incurred.
The excess of the consideration paid in 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 consideration paid. Intra-group transactions and balances are eliminated on
consolidation and consistent accounting policies are used throughout the Group for the purposes of the consolidation. Changes in ownership interests
in subsidiaries are accounted for as equity transactions if they occur after control has already been obtained and they do not result in loss of control.
As the consolidated financial statements include partnerships where the 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. Cost also includes directly attributable costs
of the investment.
When the Group ceases to have control, any retained interests in the subsidiary is remeasured to its fair value, with the change in carrying amount
recognised in profit or loss.
Notes to the financial statements
For the year ended 31st December 2010
194 Barclays PLC Annual Report 2010 www.barclays.com/annualreport10