Barclays 2013 Annual Report Download - page 324

Note 18: Fair value of assets and liabilities continued
Fair Value hierarchy
Financial assets
Loans and advances
The Fair Value hierarchy for loans and advances is determined by reference to the observability of inputs into the fair value models:
 Balances considered as readily accessible cash are classified as level 1;
 Where significant inputs into the fair value models are considered observable, for example LIBOR or the Bank of England base rate, the balances
are classified as level 2. Settlement balances and cash collateral are also classified as level 2; and
 Where unobservable inputs, such as Barclays historic and current product margins, are deemed significant, the related balances are classified as
level 3
Loans and advances to banks are mainly classified as level 2. Home loans, Credit cards, unsecured and other retail lending are generally classified
as level 3 as significant inputs used in the valuation models are unobservable. Corporate loans are mainly classified as level 2 or 3 depending on
the observability of inputs into the fair value models.
Reverse repurchase agreements
The fair value for repurchase agreements is obtained using fair value models with observable inputs. These balances are therefore classified
as level 2.
Financial liabilities
Deposits from banks
The majority of the deposits from banks balance is classified as level 2 where they represent cash collateral, settlements and other deposits.
Readily accessible cash is classified as level 1.
Customer accounts
The majority of customer account balances are classified as level 1 where the balances represent readily accessible cash, and level 2 where they
represent settlements and other deposits. The level 3 balances are largely comprised of other deposits where models with significant unobservable
inputs, such as internal margins, are being used.
Debt securities in issue
These are mainly classified as level 2 as the inputs into the fair value models used for these balances are observable.
Repurchase agreements
The fair value for repurchase agreements is obtained using fair value models with observable inputs. These balances are therefore classified
as level 2.
Subordinated liabilities
The majority of these balances are classified as level 2 as the inputs used to determine fair value are largely observable in an active market.
Critical accounting estimates and judgements
Quoted market prices are not available for many of the financial assets and liabilities that are held at fair value and the Group uses a variety of
techniques to estimate the fair value. The above note describes the more judgemental aspects of valuation in the period, including: credit
valuation adjustments on monoline exposures, commercial real estate loans, private equity investments, and fair value loans to government
and business and other services.
Note 19: Offsetting financial assets and financial liabilities
In accordance with IAS 32 Financial Instruments: Presentation, the group reports financial assets and financial liabilities on a net basis on the
balance sheet only if there is a legally enforceable right to set off the recognised amounts and there is intention to settle on a net basis, or to
realise the asset and settle the liability simultaneously. The following table shows the impact of netting arrangements on:
 all financial assets and liabilities that are reported net on the balance sheet; and
 all derivative financial instruments and reverse repurchase and repurchase agreements and other similar secured lending and borrowing
agreements that are subject to enforceable master netting arrangements or similar agreements, but do not qualify for balance sheet netting.
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322 Barclays PLC Annual Report 2013
Notes to the financial statements
For the year ended 31 December 2013 continued