Barclays 2015 Annual Report Download - page 267

home.barclays/annualreport Barclays PLC Annual Report 2015 I 265
6 Net investment income
Accounting for net investment income
Dividends are recognised when the right to receive the dividend has been established. Other accounting policies relating to net investment
income are set out in Note 16 Available for sale financial assets and Note 14 Financial assets designated at fair value.
2015
£m
2014
£m
2013
£m
Net gain from disposal of available for sale investments 374 620 145
Dividend income 8 9 14
Net gain from financial instruments designated at fair value 238 233 203
Other investment income 518 466 318
Net investment income 1,138 1,328 680
2015
Net investment income decreased by £190m to £1,138m. This was largely driven by lower gains and fewer disposals of available for sale investments
due to unfavourable market conditions. During the year, a gain of £496m (2014: £461m) was recognised in other investment income due to the final
and full legal settlement in respect of US Lehman acquisition assets.
2014
Net investment income increased by £648m to £1,328m. This was largely driven by an increase in disposals of available for sale investments due to
favourable market conditions and increases in other investment income as a result of greater certainty regarding the recoverability of certain assets
not yet received from the 2008 US Lehman acquisition (2014: £461m gain; 2013: £259m gain).
7 Credit impairment charges and other provisions
Accounting for the impairment of financial assets
Loans and other assets held at amortised cost
In accordance with IAS 39, the Group assesses at each balance sheet date whether there is objective evidence that loan assets or available for sale
financial investments (debt or equity) will not be recovered in full and, wherever necessary, recognises an impairment loss in the income
statement.
An impairment loss is recognised if there is objective evidence of impairment as a result of events that have occurred and these have adversely
impacted the estimated future cash flows from the assets. These events include:
 becoming aware of significant financial difficulty of the issuer or obligor
 a breach of contract, such as a default or delinquency in interest or principal payments
 the Group, for economic or legal reasons relating to the borrower’s financial difficulty, grants a concession that it would not otherwise consider
 it becomes probable that the borrower will enter bankruptcy or other financial reorganisation
 the disappearance of an active market for that financial asset because of financial difficulties
 observable data at a portfolio level indicating that there is a measurable decrease in the estimated future cash flows, although the decrease
cannot yet be ascribed to individual financial assets in the portfolio – such as adverse changes in the payment status of borrowers in the
portfolio or national or local economic conditions that correlate with defaults on the assets in the portfolio.
Impairment assessments are conducted individually for significant assets, which comprise all wholesale customer loans and larger retail business
loans and collectively for smaller loans and for portfolio level risks, such as country or sectoral risks. For the purposes of the assessment, loans
with similar credit risk characteristics are grouped together – generally on the basis of their product type, industry, geographical location, collateral
type, past due status and other factors relevant to the evaluation of expected future cash flows.
The impairment assessment includes estimating the expected future cash flows from the asset or the group of assets, which are then discounted
using the original effective interest rate calculated for the asset. If this is lower than the carrying value of the asset or the portfolio, an impairment
allowance is raised.
If, in a subsequent period, the amount of the impairment loss decreases, and the decrease can be related objectively to an event occurring after
the impairment was recognised, the previously recognised impairment loss is reversed by adjusting the allowance account. The amount of the
reversal is recognised in the income statement.
Following impairment, interest income continues to be recognised at the original effective interest rate on the restated carrying amount,
representing the unwind of the discount of the expected cash flows, including the principal due on non-accrual loans.
Uncollectable loans are written off against the related allowance for loan impairment on completion of the Group’s internal processes and all
recoverable amounts have been collected. Subsequent recoveries of amounts previously written off are credited to the income statement.
The Strategic Report Governance Risk review Financial review Financial statements Shareholder information