Barclays 2010 Annual Report Download - page 202

Notes to the financial statements
For the year ended 31st December 2010 continued
1 Significant accounting policies continued
The Group discontinues hedge accounting when:
a) it is determined that a derivative is not, or has ceased to be, highly effective as a hedge;
b) the derivative expires, or is sold, terminated, or exercised;
c) the hedged item matures or is sold or repaid; or
d) a forecast transaction is no longer deemed highly probable.
In certain circumstances, the Group may decide to cease hedge accounting even though the hedge relationship continues to be highly effective by
no longer designating the financial instrument as a hedging instrument. To the extent that the changes in the fair value of the hedging derivative differ
from changes in the fair value of the hedged risk in the hedged item, or the cumulative change in the fair value of the hedging derivative differs from the
cumulative change in the fair value of expected future cash flows of the hedged item, the hedge is deemed to include ineffectiveness. The amount of
ineffectiveness, provided it does not disqualify the hedge for hedge accounting, is recorded in the income statement.
Fair value hedge accounting
Changes in fair value of derivatives that qualify and are designated as fair value hedges are recorded in the income statement, together with changes
in the fair value of the hedged asset or liability that are attributable to the hedged risk.
If the hedge relationship no longer meets the criteria for hedge accounting, it is discontinued. For fair value hedges of interest rate risk, the fair value
adjustment to the hedged item is amortised to the income statement over the period to maturity of the previously designated hedge relationship using
the effective interest method.
If the hedged item is sold or repaid, the unamortised fair value adjustment is recognised immediately in the income statement.
Cash flow hedges
For qualifying cash flow hedges, the fair value gain or loss associated with the effective portion of the cash flow hedge is recognised initially in
shareholders’ equity, and recycled to the income statement in the periods when the hedged item will affect profit or loss. Any ineffective portion of the
gain or loss on the hedging instrument is recognised in the income statement immediately.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing
in equity at that time remains in equity and is recognised when the hedged item is ultimately recognised in the income statement. When a forecast
transaction is no longer expected to occur, the cumulative gain or loss that was recognised in equity is immediately transferred to the income statement.
Hedges of net investments
Hedges of net investments in foreign operations, including monetary items that are accounted for as part of the net investment, are accounted for
similarly to cash flow hedges; the effective portion of the gain or loss on the hedging instrument is recognised directly in equity and the ineffective
portion is recognised immediately in the income statement. The cumulative gain or loss previously recognised in equity is recognised in the income
statement on the disposal or partial disposal of the foreign operation, or other reductions in the Group’s investment in the operation.
Hedges of net investments may include non-derivative liabilities as well as derivative financial instruments.
Derivatives that do not qualify for hedge accounting
Derivative contracts entered into as economic hedges that do not qualify for hedge accounting are held at fair value through profit or loss.
13. Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and provisions for impairment, if required. Cost includes the original
purchase price of the asset and the costs directly attributable to bringing the asset to its working condition for its intended use. Additions and
subsequent expenditures are capitalised only to the extent that they enhance the future economic benefits expected to be derived from the assets.
Depreciation is provided on the depreciable amount of items of property, plant and equipment on a straight-line basis over their estimated useful
economic lives. The depreciable amount is the gross carrying amount, less the estimated residual value at the end of its useful economic life.
The Group uses the following annual rates in calculating depreciation:
Freehold buildings and long-leasehold property (more than 50 years to run) 2-3.3%
Computers and similar equipment 20-33%
Fixtures and fittings and other equipment 10-20%
Leased assets:
Leasehold property over the remaining life of the lease (less than 50 years to run) Over the remaining life of the lease
Costs of adaptation of freehold and leasehold propertya7-10%
Equipment installed in freehold and leasehold propertya7-10%
Note
a Where leasehold property has a remaining useful life of less than 15 years, costs of
adaptation and installed equipment are depreciated over the remaining life of the lease.
200 Barclays PLC Annual Report 2010 www.barclays.com/annualreport10