Barclays 2010 Annual Report Download - page 204

Notes to the financial statements
For the year ended 31st December 2010 continued
1 Significant accounting policies continued
The carrying values of fixed assets and goodwill are written down by the amount of any impairment and this loss is recognised in the income statement
in the period in which it occurs. A previously recognised impairment loss relating to a fixed asset may be reversed in part or in full when a change in
circumstances leads to a change in the estimates used to determine the fixed asset’s recoverable amount. The carrying amount of the fixed asset will
only be increased up to the amount that it would have been had the original impairment not been recognised. Impairment losses on goodwill are not
reversed. For the purpose of conducting impairment reviews, cash-generating units are the lowest level at which management monitors the return on
investment on assets.
16. Financial guarantees
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because
a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.
Financial guarantees are initially recognised in the financial statements at fair value on the date that the guarantee was given. Other than where the
fair value option is applied, subsequent to initial recognition, the Group’s liabilities under such guarantees are measured at the higher of the initial
measurement, less amortisation calculated to recognise in the income statement any fee income earned over the period, and any financial obligation
arising as a result of the guarantees at the balance sheet date, in accordance with policy 23.
Any increase in the liability relating to guarantees is taken to the income statement within the impairment charge. Any liability remaining is recognised
in the income statement when the guarantee is discharged, cancelled or expires.
17. Issued debt and equity securities
Issued financial instruments or their components are classified as liabilities where the contractual arrangement results in the Group having a present
obligation to either deliver cash or another financial asset to the holder, to exchange financial instruments on terms that are potentially unfavourable or
to satisfy the obligation otherwise than by the exchange of a fixed amount of cash or another financial asset for a fixed number of equity shares. Issued
financial instruments, or their components, are classified as equity where they meet the definition of equity and confer on the holder a residual interest
in the assets of the Group. The components of issued financial instruments that contain both liability and equity elements are accounted for separately
with the equity component being assigned the residual amount after deducting from the instrument as a whole the amount separately determined as
the fair value of the liability component. Financial liabilities, other than financial liabilities designated at fair value, are carried at amortised cost using the
effective interest method as set out in policy 6. Derivatives embedded in financial liabilities that are not designated at fair value are accounted for as set
out in policy 7. Equity instruments, including share capital, are initially recognised at net proceeds, after deducting transaction costs and any related
income tax. Dividend and other payments to equity holders are deducted from equity, net of any related tax.
18. Share capital
Share issue costs
Incremental costs directly attributable to the issue of new shares or options including those issued on the acquisition of a business are shown in equity
as a deduction, net of tax, from the proceeds.
Dividends on ordinary shares
Dividends on ordinary shares are recognised in equity in the period in which they are paid or, if earlier, approved by shareholders.
Treasury shares
Where Barclays PLC or any member of the Group purchases the Company’s share capital, the consideration paid is deducted from shareholders’
equity as treasury shares until they are cancelled. Where such shares are subsequently sold or reissued, any consideration received is included in
shareholders’ equity.
19. Insurance contracts and investment contracts
The Group offers wealth management, term assurance, annuity, property and payment protection insurance products to customers that take the form
of long- and short-term insurance contracts. The Group classifies its wealth management and other products as insurance contracts where these
transfer significant insurance risk, generally where the benefits payable on the occurrence of an insured event are at least 5% more than the benefits
that would be payable if the insured event does not occur.
Contracts that do not contain significant insurance risk or discretionary participation features are classified as investment contracts. Financial assets and
liabilities relating to investment contracts, and assets backing insurance contracts are classified and measured as appropriate under IAS 39, ‘Financial
Instruments: Recognition and Measurement’ as set out in policy 7.
Premiums are recognised as revenue proportionally over the period of the coverage. Claims and claims handling costs are charged to income as incurred,
based on the estimated liability for compensation owed to policyholders arising from events that have occurred up to the balance sheet date even if they
have not yet been reported to the Group, based on assessments of individual cases reported to the Group and statistical analyses for the claims incurred
but not reported.
Liabilities under unit-linked life insurance contracts (such as endowment policies) reflect the value of assets held within unitised investment pools.
Deferred acquisition costs (DAC)
Commissions and other costs that are related to securing new insurance and investment contracts are capitalised and amortised over the estimated
lives of the relevant contracts.
202 Barclays PLC Annual Report 2010 www.barclays.com/annualreport10