Barclays 2015 Annual Report Download - page 303

home.barclays/annualreport Barclays PLC Annual Report 2015 I 301
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 with 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.
2015
£m
2014
£m
Accruals and deferred income 4,271 4,770
Other creditors 3,770 3,851
Obligations under finance leases (see Note 21) – 36
Insurance contract liabilities, including unit-linked liabilities 2,569 2,766
Accruals, deferred income and other liabilities 10,610 11,423
Accruals and deferred income decreased by 10% to £4.3bn mainly driven by lower staff costs and administrative and general costs accrued as at
31 December 2015.
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 £115m (2014: £157m). 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 £65bn (2014: £82bn) or £49bn (2014: £74bn) after
reinsurance. Of this insured risk, £55bn (2014: £69bn) or £43bn (2014: £66bn) 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 £5m (2014: £8m).
27 Provisions
Accounting for provisions
The Group applies IAS 37 Provisions, Contingent Liabilities and Contingent Assets in accounting for non-financial liabilities.
Provisions are recognised for present obligations arising as consequences of past events where it is more likely than not that a transfer of economic
benefit will be necessary to settle the obligation, which can be reliably estimated. Provision is made for the anticipated cost of restructuring, including
redundancy costs when an obligation exists. This is the case when the Group has a detailed formal plan for restructuring a business and has raised valid
expectations in those affected by the restructuring by announcing its main features or starting to implement the plan. A provision is made for undrawn
loan commitments if it is probable that the facility will be drawn and results in the recognition of an asset at an amount less than the amount advanced.
Onerous
contracts
£m
Redundancy
and
restructuring
£m
Undrawn
contractually
committed
facilities and
guarantees
£m
Customer redress Legal,
competition
and
regulatory
matters
£m
Sundry
provisions
£m
Total
£m
Payment
Protection
Insurance
£m
Other
customer
redress
£m
As at 1 January 2015 205 291 94 1,059 586 1,690 210 4,135
Additions 120 190 25 2,200 821 1,559 177 5,092
Amounts utilised (42) (136) (2) (1,171) (440) (2,616) (49) (4,456)
Unused amounts reversed (149) (140) (37) – (32) (136) (86) (580)
Exchange and other movements 7 (19) (20) 18 (39) (8) 12 (49)
As at 31 December 2015 141 186 60 2,106 896 489 264 4,142
Provisions expected to be recovered or settled within no more than 12 months after 31 December 2015 were £2,113m (2014: £3,464m).
Onerous contracts
Onerous contract provisions comprise an estimate of the costs involved with fulfilling the terms and conditions of contracts where the liability is
higher than the amount of economic benefit to be received.
Redundancy and restructuring
These provisions comprise the estimated cost of restructuring, including redundancy costs where an obligation exists. Additions made during the
year relate to formal restructuring plans and have either been utilised, or reversed, where total costs are now expected to be lower than the original
provision amount.
Notes to the financial statements
Accruals, provisions, contingent liabilities and legal proceedings
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.
The Strategic Report Governance Risk review Financial review Financial statements Shareholder information