Barclays 2011 Annual Report Download - page 233

20 Fair value of financial instruments continued
Gains and losses on Level 3 financial assets and liabilities
The following table discloses the gains and losses recognised in the year arising on Level 3 financial assets and liabilities held at year end.
Gains and losses recognised during the period on Level 3
financial assets and liabilities held Trading
portfolio
assets
£m
Financial
assets
designated at
fair value
£m
Available for
sale assets
£m
Trading
portfolio
liabilities
£m
Financial
liabilities
designated at
fair value
£m
Net derivative
financial
instruments
£m
Total
£m
As at 31 December 2011
Recognised in the income statement
– trading income (44) 270 – – 729 (324) 631
– other income – 118 (54) – – – 64
Total gains or losses recognised in other comprehensive
income
– – 135 – – – 135
Total (44) 388 81 – 729 (324) 830
As at 31 December 2010
Recognised in the income statement
– trading income 345 215 – (1) (528) (66) (35)
– other income – 115 (166) – – – (51)
Total gains or losses recognised in other comprehensive
income
– – 133 – – – 133
Total 345 330 (33) (1) (528) (66) 47
Valuation control framework
The Independent Valuation Control function is responsible for independent price verification, oversight of fair value adjustments and escalation of
valuation issues. This process covers all fair value positions and is a key control in ensuring the material accuracy of valuations.
Price verification uses independently sourced data that is deemed most representative of the market. The characteristics against which the data source
is assessed are independence, reliability, consistency with other sources and evidence that the data represents an executable price. The most current
data available at balance sheet date is used. Where significant variances are noted in the independent price verification process, an adjustment is taken
to the fair value position. Additional fair value adjustments may be taken to reflect such factors as bid-offer spreads, market data uncertainty, model
limitations and counterparty risk.
Independent price verification results and fair value adjustments are reported on a monthly basis to the Valuation Committee. This committee is
responsible for overseeing valuation and fair value adjustment policy within Corporate and Investment Banking and this is the forum to which valuation
issues are escalated. The Valuation Committee delegates more detailed review to the following five Sub-Committees: Independent Valuations, Legacy
and Other Assets, Litigation Risk, Models, and Governance.
The Independent Valuations Sub-Committee reviews the results of the independent price verification and fair value adjustments process on a monthly
basis. This includes, but is not limited to, reviewing fair value adjustments and methodologies, independent price verification results, limits and
valuation uncertainty. The Legacy and Other Assets Sub-Committee is responsible for overseeing the valuation and measurement issues arising in
legacy assets, certain AFS positions and other assets as delegated by the Valuation Committee. The Litigation Risk Sub-Committee is responsible for
overseeing the valuation and measurement issues arising from legal risks within Barclays Corporate and Investment Banking.
The Models Sub-Committee is responsible for overseeing policies and controls related to the use of valuation models. This includes but is not limited to
review of global model risk reports, the trade approval process and model validation, model-related fair value adjustments, and independent price
verification variances or collateral disputes relating to model usage.
The Governance Sub-Committee is responsible for overseeing the governance of valuation processes, policies and procedures. This Sub-Committee
monitors the development of the Valuation control framework, completeness of balance sheet oversight and appropriate representation of Senior
Management at the Valuation Committee and each of the above referenced Sub-Committees. Regulatory and accounting issues related to fair value are
assessed by the Governance Sub-Committee.
Barclays PLC Annual Report 2011 www.barclays.com/annualreport 231
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