Barclays 2012 Annual Report Download - page 280

Accruals, provisions, legal proceedings and contingent liabilities
The notes included in this section focus on the Group’s accruals, provisions and contingent liabilities. Provisions
are recognised for present obligations arising as consequences of past events where it is probable that a transfer
of economic benefit will be necessary to settle the obligation and it can be reliably estimated. Contingent liabilities
reflect potential liabilities that are not recognised on the balance sheet.
26 Accruals, deferred income and other liabilities
Accounting for insurance contracts
The Group applies IFRS 4 Insurance Contracts to its insurance contracts. An insurance contract is a contract that compensates a third party
against a loss from non-financial risk. Some wealth management and other products, such as life assurance contracts, combine investment
and insurance features; these are treated as insurance contracts when they pay benefits that are at least 5% more than they would pay if the
insured event does not occur.
Insurance liabilities include current best estimates of future contractual cash flows, claims handling, and administration costs in respect of
claims. Liability adequacy tests are performed at each balance sheet date to ensure the adequacy of contract liabilities. Where a deficiency
is highlighted by the tests, insurance liabilities are increased, any deficiency being recognised in the income statement.
Insurance premium revenue is recognised in the income statement in the period earned, net of reinsurance premiums payable, in net
premiums from insurance contracts. Increases and decreases in insurance liabilities are recognised in the income statement in net claims
and benefits on insurance contracts.
2012
£m
2011
£m
Accruals and deferred income 4,806 4,959
Other creditors 4,702 5,171
Obligations under finance leases (see Note 20) 35 64
Insurance contract liabilities, including unit-linked liabilities 2,689 2,386
Accruals, deferred income and other liabilities 12,232 12,580
Insurance liabilities relate principally to the Group’s long term business. Insurance contract liabilities associated with the Group’s short term
non-life business are £126m (2011: £118m). The maximum amounts payable under all of the Group’s insurance products, ignoring the probability
of insured events occurring and the contribution from investments backing the insurance policies, were £102bn (2011: £104bn) or £79bn
(2011: £82bn) after reinsurance. Of this insured risk, £87bn (2011: £89bn) or £67bn (2011: £69bn) after reinsurances was concentrated in short
term insurance contracts in Africa.
The impact to the income statement and equity under a reasonably possible change in the assumptions used to calculate the insurance liabilities
would be £7m (2011: £8m).
barclays.com/annualreport278 I Barclays PLC Annual Report 2012
Notes to the financial statements
For the year ended 31 December 2012 continued