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Barclays PLC (BARC)

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Friday 06 September, 2013

Barclays PLC

Restated 2012 Financial Statements

RNS Number : 4481N
Barclays PLC
06 September 2013
 



 

 

 

 

 

 

 

6 September 2013

 

Barclays PLC

 

Barclays' restated 2012 financial statements

 

On 16 April 2013 Barclays PLC published 'Group Reporting Changes' which detailed the impacts of the adoption of IFRS 10 Consolidated Financial Statements ("IFRS 10") and IAS 19 Employee Benefits (Revised 2011) ("IAS 19 Revised 2011").  Today Barclays releases restated 2012 financial statements that reflect the changes detailed within the 'Group Reporting Changes' document and also includes restated comparative 2010 figures.

 

The publication is required by the U.S. Securities and Exchange Commission (SEC), in order to market in the U.S. the rights issue as announced on 30 July 2013.

The below document presents the restated statutory primary statements and notes required by IFRS, and have been restated by the following standards and periods:

·      IFRS 10 Consolidated Financial Statements - 2012 only

·      IAS 19 Employee Benefits - 2012, 2011, and 2010

·      IFRS 8 Operating Segments -2012, 2011, and 2010

·      IFRS 7 Financial Instruments: Disclosures -  2012 and 2011 only

The financial statements have only been restated for the changes in accounting standards and no consideration has been made to subsequent events post the initial signing date of the 2012 accounts.

All documentation, including the 2012 & 2011 Restatement Document is available at www.barclays.com/investorrelations.

To view any charts or diagrams referred to in the below restatement document please click on or paste the following link into your web browser: http://www.rns-pdf.londonstockexchange.com/rns/4481N_-2013-9-6.pdf

-Ends-

 

For further information please contact:

 

Investor Relations

Media Relations

Charlie Rozes

Giles Croot

+44 (0)207-116-5752

+44 (0)207-116-6132

 

About Barclays

Barclays is a major global financial services provider engaged in personal banking, credit cards, corporate and investment banking and wealth and investment management with an extensive international presence in Europe, the Americas, Africa and Asia. Barclays' purpose is to help people achieve their ambitions - in the right way.

With over 300 years of history and expertise in banking, Barclays operates in over 50 countries and employs approximately 140,000 people. Barclays moves, lends, invests and protects money for customers and clients worldwide.

For further information about Barclays, please visit our website www.barclays.com.

 

 

 

 

 

 

Barclays PLC

Restated 2012 Financial Statements

 

31 December 2012

 

 

6 September 2013

 

 



 

Table of contents

Page

Overview of Reporting Changes

4

Report of Independent Registered Public Accounting Firm

8

Consolidated Income Statement

9

Consolidated Statement of Comprehensive Income

10

Consolidated Balance Sheet

11

Consolidated Statement of Changes in Equity

12

Consolidated Cash Flow Statement

14

Parent Company Accounts

15

Notes to the financial statements

18

Risk review

102

Risk management

134

 


 

 

 

 

BARCLAYS PLC, 1 CHURCHILL PLACE, LONDON, E14 5HP, UNITED KINGDOM. TELEPHONE: +44 (0) 20 7116 1000. COMPANY NO. 48839



 

The term 'Barclays PLC Group' or the 'Group' means Barclays PLC together with its subsidiaries and the term 'Barclays Bank PLC Group' means Barclays Bank PLC together with its subsidiaries. 'Barclays' and 'Group' are terms which are used to refer to either of the preceding groups when the subject matter is identical. The term 'Company', 'Parent Company' or 'Parent' refers to Barclays PLC and the term 'Bank' refers to Barclays Bank PLC. In this report, the abbreviations '£m' and '£bn' represent millions and thousands of millions of pounds Sterling respectively; the abbreviations '$m' and '$bn' represent millions and thousands of millions of US Dollars respectively; '€m' and '€bn' represent millions and thousands of millions of euros respectively and 'C$m' and 'C$bn' represent millions and thousands of millions of Canadian dollars respectively.

 

Unless otherwise stated, the income statement analyses compare the 12 months to 31 December 2012 to the corresponding 12 months of 2011 and balance sheet comparisons, relate to the corresponding position at 31 December 2011. Unless otherwise stated, all disclosed figures relate to continuing operations. Relevant terms that are used in this document but are not defined under applicable regulatory guidance or International Financial Reporting Standards (IFRS) are explained in the glossary online at www.barclays.com/annualreport.

 

The information in this document does not comprise statutory accounts or interim financial statements within the meaning of Section 434 of the Companies Act 2006 and IAS 34 respectively. Statutory accounts for the year ended 31 December 2012, which included certain information required for the Joint Annual Report on Form 20-F of Barclays PLC and Barclays Bank PLC to the US Securities and Exchange Commission (SEC) and which contained an unqualified audit report under Section 495 of the Companies Act 2006 and which did not make any statements under Section 498 of the Companies Act 2006, have been delivered to the Registrar of Companies in accordance with Section 441 of the Companies Act 2006.

 

Forward-looking statements

 

This document contains certain forward-looking statements within the meaning of Section 21E of the US Securities Exchange Act of 1934, as amended, and Section 27A of the US Securities Act of 1933, as amended, with respect to certain of the Group's plans and its current goals and expectations relating to its future financial condition and performance. Barclays cautions readers that no forward-looking statement is a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking statements. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements sometimes use words such as "may", "will", "seek", "continue", "aim", "anticipate", "target", "projected", "expect", "estimate", "intend", "plan", "goal", "believe", "achieve" or other words of similar meaning. Examples of forward-looking statements include, among others, statements regarding the Group's future financial position, income growth, assets, impairment charges, business strategy, capital and leverage ratios, payment of dividends, projected levels of growth in the banking and financial markets, projected costs, commitments in connection with the Transform Programme, estimates of capital expenditures and plans and objectives for future operations and other statements that are not historical fact.

 

By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances, including, but not limited to, UK domestic, Eurozone and global macroeconomic and business conditions, the effects of continued volatility in credit markets, market related risks such as changes in interest rates and foreign exchange rates, effects of changes in valuation of credit market exposures, changes in valuation of issued notes, the policies and actions of governmental and regulatory authorities (including requirements regarding capital and Group structures and the potential for one or more countries exiting the Eurozone), changes in legislation, the further development of standards and interpretations under IFRS and prudential capital rules applicable to past, current and future periods, evolving practices with regard to the interpretation and application of standards under IFRS, the outcome of current and future legal proceedings, the success of future acquisitions and other strategic transactions and the impact of competition, a number of such factors being beyond the Group's control. As a result, the Group's actual future results may differ materially from the plans, goals, and expectations set forth in the Group's forward looking statements.

 

Any forward-looking statements made herein speak only as of the date they are made. Except as required by the UK Financial Services Authority (FSA), the London Stock Exchange plc ('LSE') or applicable law, Barclays expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Barclays expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. The reader should, however, consult any additional disclosures that Barclays has made or may make in documents it has published or may publish via the Regulatory News Service of the LSE and/or has filed or may file with the US Securities and Exchange Commission.

 

 

 



[Page left blank for pagination purposes]

 



 

On the 16th April 2013 Barclays PLC published 'Group Reporting Changes' which detailed the impacts of the adoption of IFRS 10 Consolidated Financial Statements ("IFRS 10") and IAS 19 Employee Benefits (Revised 2011) ("IAS 19 Revised 2011").  It also described the impact to the Group's segmental results of the allocation of elements of the Head Office results to businesses and portfolio restatements between businesses.  Changes were effective from 1st January 2013 and were consequently applied in the preparation of the 2013 Interim Results Announcement. 

Basis of preparation of the restatement document

This restatement document consists of financial statements for the year ended 31 December 2012 to provide historical financial information to users on a basis consistent with Barclays accounting policies adopted for the Interim Results Announcement for the 6 months ending 30 June 2013.   The resulting changes to previously presented financial statements are as follows, consistent with the transition guidance in the relevant standards:

·      The financial statements have been restated as if IAS 19 (Revised 2011) had been in effect for all periods presented.

·      Results have been restated for IFRS 10 from 1 January 2012. Reserves have been restated for the impacts of the standard on the Group's assets and liabilities on this date.

·      The segmental disclosures required by IFRS 8 have also been restated for all periods presented to reflect changes made in 2013 to the allocation of Head Office results to businesses and portfolio restatements between the businesses. 

In addition to these changes of accounting policy, new disclosures relating to offsetting financial assets and financial liabilities arising from the revisions to IFRS 7 Financial Instruments: Disclosures have been provided as at 31 December 2012 and 31 December 2011.

The following have not been included in the restatement document:

·      Disclosures that will be required by IFRS 13 Fair Value Measurement as this standard does not require these disclosures to be provided on a retrospective basis.

·      Disclosures that will be required by IFRS 12 Disclosure of Interests in Other Entities to be presented in the financial statements for the year ending 31 December 2013 have not been included in the restatement document as these disclosures were not applicable under IAS 34 and were therefore not provided in the half year results announcement for the period ended 30 June 2013 as they were not part of the accounting policies adopted at that date. Comparative disclosures in respect of unconsolidated structured entities are not required by the standard in the year of first adoption.

·      Adjustments or disclosures in relation to any post balance sheet events that have occurred between 5 March 2013 (the date of the approval of the 31 December 2012 financial statements) and 29 August 2013.

 

More information about the financial effect of the restatements is provided below.

Accounting restatements

IAS 19 (Revised 2011) and IFRS 10 became effective on 1 January 2013 and result in the restatements to the Barclays PLC results for the years ended 31 December 2010, 2011 and 2012. The 2012 results restatement reflects the application of IAS 19 and IFRS 10, whilst the 2011 and 2010 results restatement reflects only the application of IAS 19, consistent with IFRS 10's transition relief guidance.

IFRS 10

IFRS 10 replaced requirements in IAS 27 Consolidated and Separate Financial Statements and SIC 12 Consolidation - Special Purpose Entities. This introduced new criteria to determine whether entities in which the Group has interests should be consolidated. The implementation of IFRS 10 resulted in the Group consolidating some entities that were previously not consolidated and deconsolidating some entities that were previously consolidated, principally impacting the consolidation of entities in the Investment Bank with credit market exposures.

IAS 19

The Group adopted IAS 19 (Revised 2011) from 1 January 2013 which, amongst other changes, requires actuarial gains and losses arising from defined benefit pension schemes to be recognised in full. Previously the Group deferred these over the remaining average service lives of the employees (known as the 'corridor' approach).

IFRS 11

In addition to the above, the Group also adopted IFRS 11, Joint Arrangements, which replaced IAS 31 Interests in Joint Ventures from 1 January 2012. The financial impact was immaterial.

 



 

The financial impact on the Group for the year ended 31 December 2012 had IFRS 10 and IAS 19 been adopted is shown in the table below:

Impact of accounting restatements



Restatement adjustments


  


2012 as

Published

IFRS 10

IAS 19a

2012 as

Restated

Statutory Income Statement


£m

£m

£m

£m

Profit before tax


246 

573 

(22)

797 

Tax


(482)

(134)

(616)

(Loss) / Profit after tax


(236) 

439 

(22)

181 

  






Balance Sheet






Total assets


1,490,321 

(144)

(1,842)

1,488,335 

Total liabilities


1,427,364 

333 

652 

1,428,349 

Total shareholders' equity


62,957 

(477)

(2,494)

59,986 

  






Performance Measures






Statutory return on average shareholders' equity


(1.9%)

0.7%

-

(1.2%)

Net asset value per share


438p

(4p)

(20p)

414p

  






Capital






Core tier 1 capital 


42,121 

(399)

41,722 

Core tier 1 ratio (%)


10.9%

(0.1%)

 - 

10.8%



The financial impact on the Group for the year ended 31 December 2011 and 2010 had IAS 19 been adopted is shown in the table below:

Impact of accounting restatements







  

2011 as

Published

IAS 19a Restatement Adjustment

2011 as Restated


2010 as

Published

IAS 19a Restatement Adjustment

2010 as Restated

Statutory Income Statement

£m

£m

£m


£m

£m

£m

Profit before tax

5,879

(109)

5,770 


6,065

(66)

5,999 

Tax

(1,928)

26

(1,902)


(1,516)

16

(1,500)

Profit after tax

3,951

(83)

3,868 


4,549

(50)

4,499 

  








Balance Sheet








Total assets

1,563,527

(1,444)

1,562,083 


1,489,645

635

1,490,280 

Total liabilities

1,498,331

(207)

1,498,124 


1,427,383

2,657

1,430,040 

Total shareholders' equity

65,196

(1,237)

63,959 


62,262

(2,022)

60,240 

  








Performance Measures








Statutory return on average shareholders' equity

5.8%

0.1%

5.9%


7.2%

0.2%

7.4%

Net asset value per share

456p

(10p)

446p


417p

(16p)

401p

  








Capital








Core tier 1 capital 

43,066

43,066 


42,861

-

42,861 

Core tier 1 ratio (%)

11.0%

 - 

11.0%


10.8%

-

10.8%

The positive financial impact of adopting IFRS 10 on the Group's results for the year ended 31 December 2012 principally reflects an increase in trading income and a reduction in impairment in the Investment Bank. However, there is a cumulative reduction in total shareholders' equity at 31 December 2012 of £477m as a result of the difference between the carrying value of previously unconsolidated interests, previously recorded at amortised cost, and the fair value of those assets when consolidated under IFRS 10.

Following the adoption of IAS 19, retirement benefit assets reduced by £2.3bn (2011: £1.8bn, 2010: £nil) and retirement benefit liabilities increased by £1.0bn as at 31 December 2012 (2011: reduced £0.1bn, 2010: increased £2.7bn), with additional deferred tax assets recognised of £0.8bn (2011: £0.5bn, 2010: £0.6bn), of which £0.4bn has been recognised in deferred tax assets and £0.4bn in deferred tax liabilities. As a result total assets reduced by £1.8bn and total liabilities increased by £0.7bn. Profit after tax for the period reduced by £22m (2011: £83m, 2010: £50m) with other comprehensive income lower by £2.4bn (2011: £1.2bn lower, 2010: £0.5bn higher), resulting in a £2.5bn reduction in shareholders' equity.

 

 

 

Note

a The implementation of IAS 19 has no overall impact on the existing Core Tier 1 capital base as current regulatory rules require banks to derecognise any defined benefit pension asset from its capital base.



 

Disclosure Amendments

IFRS 7

The Group adopted IFRS 7 (revised 2011) from 1 January 2013, which considerably expanded the disclosure requirements for the offsetting of financial assets and liabilities. As part of this requirement the Group disclosed gross amounts subject to rights of set-off for financial assets and liabilities, amounts set off in accordance with the accounting standards followed, and the related net credit exposure. New disclosures have been made for 2011 and 2012 to reflect the application of IFRS 7, with no impact on the Barclays PLC results.

 

IAS 1

The Group has adopted, from 1 January 2013, the revisions to IAS 1 Presentation of Financial Statements, to distinguish gains or losses included in the Statement of Other Comprehensive Income that will be subsequently reclassified to profit or loss from those that will not. Comparatives have been modified for this change, which affects the presentation of the affected items only.

Segmental restatements

Head Office allocations

As stated in the 2012 results announcement, the Group has determined that it will allocate more elements of the Head Office results to the businesses, so that the aggregate of those businesses' results is more closely aligned to the Group's results, including Group return on equity. Segmental reporting reflects the information as presented to key management. For each income and expense item previously recorded in Head Office, consideration has been given to whether there is a logical basis for increased allocation of such items to other businesses:

-    Intra-group allocation of funding costs and other income items now includes the majority of the costs of subordinated debt instruments, preference shares and allocation of liquidity costs; increased allocation of intra-group interest; and the elimination of fees to the Investment Bank for Structured Capital Markets activities. The allocation of the funding costs is based on the capital demand created by each business for the instruments from which these costs arise and intra-group interest is allocated on tangible equity of the businesses

-    Head Office operating cost items, including the UK bank levy and Financial Services Compensation Scheme, have been allocated to businesses wherever practicable using the most appropriate driver of that cost

The residual Head Office result in the future will depend on the level of Group capital compared to the ratio used for allocation of capital to the businesses and other residual items which are not allocated to the businesses.

The effect of the changes in allocation methodology on the 2012, 2011 and 2010 profit before tax by business are summarised in the table below:

Impact of Head Office allocations

Impact on

profit before tax

  

2012 

2011 

2010 

  

£m

£m

£m

UK RBB

(220)

(136)

(114)

Europe RBB

(57)

(43)

(16)

Africa RBB

(98)

(80)

(138)

Barclaycard

(58)

(35)

(50)

Investment Bank

(701)

(573)

(283)

Corporate Banking

(111)

(24)

(45)

Wealth and Investment Management

(36)

(9)

(22)

Head Office and Other Operations

1,281 

900 

668 

Total

-

-

 

For 2012, the net effect of the intra-group allocations is to increase Head Office profit before tax by £1,281m. Non-controlling interests in Head Office also reduce by £388m as a result of the allocation of preference share costs.

The change in allocated equity reduces the average equity held at Head Office for the year ended 31 December 2012 from £8,939m to £4,313m.

As noted in the Strategic Review on 12 February 2013, the Head Office allocation has the effect of reducing the published returns of the individual businesses. The Group level returns and 2015-16 financial targets are unaffected by this intra-group reallocation.

The impact of the allocation of Head Office items to business segments is to reduce the Return on Equity consumed by the Head Office by 3.5% from 4.3% to 0.8%.

 



 

Some portfolio restatements have been implemented in Q1 2013 to reflect the management of the relevant businesses. In this document, the segmental reporting note for 2012, 2011 and 2010 has been restated to reflect these changes:


-    Ongoing Europe Retail and Business Banking credit cards operations are transferred to Barclaycard (which already includes the Group's credit card operations in the UK and US, South Africa and other countries). This results in a profit before tax reallocation of £52m (2011: £70m, 2010: £93m) between the two businesses

-    Africa Retail and Business Banking - certain components are transferred to Corporate Banking and the Investment Bank:

i.       This includes alignment of existing corporate client relationships from retail to Corporate Banking, primarily all African subsidiaries of Barclays' global corporate client base and large local clients. This results in a profit before tax reallocation of £28m (2011: £31m, 2010: £33m) to Corporate Banking

ii.     Barclays Africa sales and trading activity is transferred to the Investment Bank (which already includes Absa Capital, the South Africa-based investment banking operation). This results in a profit before tax reallocation of £17m (2011: £17m, 2010: £17m) to the Investment Bank

-    Absa's debit cards operation is transferred from Barclaycard to Africa Retail and Business Banking (reflecting greater synergies with the Africa Retail and Business Banking business). This results in a profit before tax reallocation of £15m (2011: £18m, 2010: £nil) from Barclaycard to Africa Retail and Business Banking

 

Change in Business Allocation of Employees

The Group has changed the allocation of full time equivalent employees so that they are allocated to businesses based upon utilisation of underlying headcount rather than the entity they are employed by. The change in business allocation includes 1,700 Head Office employees that are now allocated across the businesses. There is no impact on the Group's overall headcount. This document reflects this new allocation basis in 2012, 2011 and 2010.

 

Impact of change in allocation of employees

2012 as Published

Head Office Allocation

Group Structure

2012 as Restated

2011 as Restated

2010 as Restated

UK RBB

34,800 

100 

(1,900)

33,000 

32,400 

33,200

Europe RBB

7,900 

100 

(500)

7,500 

8,100 

9,100

Africa RBB

41,700 

200 

(1,400)

40,500 

42,700 

46,500

Barclaycard

11,000 

200 

(100)

11,100 

10,900 

10,300

Investment Bank

24,000 

700 

900 

25,600 

24,400 

25,100

Corporate Banking

10,300 

200 

2,500 

13,000 

14,000 

14,700

Wealth and Investment Management

7,900 

200 

200 

8,300 

8,500 

8,500

Head Office and Other Operations

1,600 

(1,700)

300 

200 

100 

100

Total

139,200 

139,200 

141,100 

147,500

 


 

 

Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Barclays PLC


In our opinion, the accompanying Consolidated income statements and the related Consolidated balance sheets, Consolidated cash flow statements and, Consolidated statements of comprehensive income and Consolidated statements of changes in equity present fairly, in all material respects, the financial position of Barclays PLC ('the Company') and its subsidiaries at 31 December 2012 and 31 December 2011 and the results of their operations and cash flows for each of the three years in the period ended 31 December 2012, in conformity with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board.  Also, in our opinion the Company maintained, in all material respects, effective internal control over financial reporting as of 31 December 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's report on internal control over financial reporting as it pertains to Barclays PLC in the Directors' report.  Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated audits. 

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. 

 

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

 

 

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

 

/s/ PricewaterhouseCoopers LLP

London, United Kingdom

5 March 2013, except with respect to our opinion on the Consolidated Financial Statements and related notes insofar as it relates to the effects of the adoption of IFRS 10: Consolidated Financial Statements pervasive across all notes; the adoption of the revisions to IAS 1 Presentation of Financial Statements noted in the Statement of Other Comprehensive Income; the reallocation of certain of the Group's activities between reportable segments discussed in Note 2; the adoption of IFRS 7: Financial Instruments: Disclosures discussed in Note 19; and the adoption of IAS 19: Employee Benefits (revised 2011) discussed in Note 38, for which the date is 6 September 2013.

               Consolidated income statement

 

For the year ended 31 December


2012 

2011 

2010 


Notes

£m

£m

£m

Continuing operations





Interest income

3

19,211 

20,589 

20,035 

Interest expense

3

(7,557)

(8,388)

(7,512)

Net interest income


11,654 

12,201 

12,523 

Fee and commission income

4

10,213 

10,208 

10,368 

Fee and commission expense

4

(1,677)

(1,586)

(1,497)

Net fee and commission income


8,536 

8,622 

8,871 

Net trading income

5

3,347 

7,660 

8,078 

Net investment income

6

844 

2,305 

1,477 

Net premiums from insurance contracts


896 

1,076 

1,137 

Gains on debt buy-backs and extinguishments


-  

1,130 

-  

Net gain on disposal of investment in BlackRock, inc.


227 

-  

-  

Other income


105 

39 

118 

Total income


25,609 

33,033 

32,204 

Net claims and benefits incurred on insurance contracts


(600)

(741)

(764)

Total income net of insurance claims


25,009 

32,292 

31,440 

Credit impairment charges and other provisions

7

(3,340)

(3,802)

(5,672)

Impairment of investment in BlackRock, Inc.

7

-  

(1,800)

-  

Net operating income


21,669 

26,690 

25,768 

Staff costs

36

(10,470)

(11,516)

(11,982)

Administration and general expenses

8

(6,643)

(6,356)

(6,585)

Depreciation of property, plant and equipment

24

(669)

(673)

(790)

Amortisation of intangible assets

25

(435)

(419)

(437)

Goodwill impairment

25

-  

(597)

(243)

Provision for PPI redress

28

(1,600)

(1,000)

-  

Provision for interest rate hedging products redress

28

(850)

-  

-  

UK bank levy


(345)

(325)

-  

Operating expenses


(21,012)

(20,886)

(20,037)

Share of post-tax results of associates and joint ventures


110 

60 

58 

Profit/(loss) on disposal of subsidiaries, associates and joint ventures

9

28 

(94)

81 

Gain on acquisitions


-  

129 

Profit before tax


797 

5,770 

5,999 

Taxation

10

(616)

(1,902)

(1,500)

Profit after tax


181 

3,868 

4,499 






Attributable to:





Equity holders of the Parent


(624)

2,924 

3,514 

Non-controlling interests

35

805 

944 

985 

Profit after tax


181 

3,868 

4,499 








p

p

p

Earnings per share





Basic (loss)/earnings per share

11

(5.1)

24.4 

30.0 

Diluted (loss)/earnings per share

11

(5.1)

23.3 

28.1 

Dividends per share


6.5 

6.0 

5.5 

Interim dividends per share


3.0 

3.0 

3.0 

Final dividend per share

12

3.5 

3.0 

2.5 

 

       Consolidated statement of comprehensive income

  




For the year ended 31 December

2012 

2011 

2010 

  

£m

£m

£m

Profit after tax

181 

3,868 

4,499 

Other comprehensive income from continuing operations:




Currency translation reserve a




- Currency translation differences

(1,548)

(1,607)

1,184 

Available for sale reserve a




- Net gains/(losses) from changes in fair value

1,237 

2,742 

(133)

- Net gains transferred to net profit on disposal

(703)

(1,614)

(1,020)

- Net losses transferred to net profit due to impairment

40 

1,860 

53 

 - Net losses/(gains) transferred to Net profit due to fair value hedging

474 

(1,803)

(308)

- Changes in insurance liabilities

(150)

18 

31 

- Tax

(352)

171 

141 

Cash flow hedging reservea




- Net gains from changes in fair value

1,499 

2,407 

601 

- Net gains transferred to net profit

(695)

(753)

(684)

- Tax

(142)

(391)

39 

Other

96 

(74)

59 

Total comprehensive (loss)/income that may be recycled to profit or loss

(244)

956 

(37)

  




Other comprehensive (loss)/income not recycled to profit or loss:




Retirement benefit remeasurements

(1,553)

1,033 

693 

Deferred tax

318 

(202)

(192)

Other comprehensive (loss)/income for the period

(1,479)

1,787 

464 

  




Total comprehensive (loss)/income for the year

(1,298)

5,655 

4,963 

  




Attributable to:




Equity holders of the Parent

(1,894)

5,324 

3,426 

Non-controlling interests

596 

331 

1,537 

  

(1,298)

5,655 

4,963 

 

 

 

 

 

 

    Note 
a For further details refer to Note 34.

                    Consolidated balance sheet


 




As at 31 December


2012 

2011 


Notes

£m

£m

Assets




Cash and balances at central banks


86,191 

106,894 

Items in the course of collection from other banks


1,473 

1,812 

Trading portfolio assets

13

146,352 

152,183 

Financial assets designated at fair value

14

46,629 

36,949 

Derivative financial instruments

15

469,156 

538,964 

Available for sale investments

16

75,109 

68,491 

Loans and advances to banks

20

40,462 

47,446 

Loans and advances to customers

20

423,906 

431,934 

Reverse repurchase agreements and other similar secured lending

23

176,522 

153,665 

Prepayments, accrued income and other assets


4,365 

4,563 

Investments in associates and joint ventures

40

633 

427 

Property, plant and equipment

24

5,754 

7,166 

Goodwill and intangible assets

25

7,915 

7,846 

Current tax assets

10

252 

374 

Deferred tax assets

10

3,563 

3,328 

Retirement benefit assets

38

53 

41 

Total assets


1,488,335 

1,562,083 

Liabilities




Deposits from banks


77,012 

91,116 

Items in the course of collection due to other banks


1,587 

969 

Customer accounts


385,411 

366,032 

Repurchase agreements and other similar secured borrowing

23

217,178 

207,292 

Trading portfolio liabilities

13

44,794 

45,887 

Financial liabilities designated at fair value

17

78,561 

87,997 

Derivative financial instruments

15

462,721 

527,910 

Debt securities in issue


119,525 

129,736 

Subordinated liabilities

32

24,018 

24,870 

Accruals, deferred income and other liabilities

27

12,532 

12,580 

Provisions

28

2,766 

1,529 

Current tax liabilities

10

620 

1,397 

Deferred tax liabilities

10

342 

566 

Retirement benefit liabilities

38

1,282 

243 

Total liabilities


1,428,349 

1,498,124 





Shareholders' equity




Shareholders' equity excluding non-controlling interests


50,615 

54,352 

Non-controlling interests

35

9,371 

9,607 

Total shareholders' equity


59,986 

63,959 

Total liabilities and shareholders' equity


1,488,335 

1,562,083 

 

The financial statements on pages 9 to 100 were approved by the Board Audit Committee under the authority of the Board of Directors on 29 August 2013 and signed on behalf of the company by:

 

Sir David Walker

Group Chairman

 

Antony Jenkins

Group Chief Executive

 

              Consolidated Statements of Changes in Equity


  

  

  

  

  






Called up

share

capital

and share

premiuma

Available

for sale

reserveb

Cash

flow

hedging

reserveb

Currency

translation

reserveb

Other

reserves and treasury sharesb

Retained

earnings

Total

Non-

controlling

interests

Total

equity


£m

£m

£m

£m

£m

£m

£m

£m

£m

Balance as at 31 December 2011

12,380 

25 

1,442 

1,348 

1,022 

38,135 

54,352 

9,607 

63,959 

Effects of the adoption of IFRS 10

-  

-  

-  

-  

-  

(946)

(946)

-  

(946)

Balance as at 1 January 2012

12,380 

25 

1,442 

1,348 

1,022 

37,189 

53,406 

9,607 

63,013 

(Loss)/profit after tax

-  

-  

-  

-  

-  

(624)

(624)

805 

181 

Currency translation movements

-  

-  

-  

(1,289)

-  

-  

(1,289)

(259)

(1,548)

Available for sale investments

-  

502 

-  

-  

-  

-  

502 

44 

546 

Cash flow hedges

-  

-  

657 

-  

-  

-  

657 

662 

Pension remeasurement

-  

-  

-  

-  

-  

(1,235)

(1,235)

-  

(1,235)

Other

-  

-  

-  

-  

-  

95 

95 

96 

Total comprehensive income/(loss) for the year

-  

502 

657 

(1,289)

-  

(1,764)

(1,894)

596 

(1,298)

Issue of shares under employee share schemes

97 

-  

-  

-  

-  

717 

814 

-  

814 

Increase in treasury shares

-  

-  

-  

-  

(979)

-  

(979)

-  

(979)

Vesting of shares under employee share schemes

-  

-  

-  

-  

946 

(946)

-  

-  

-  

Dividends paid

-  

-  

-  

-  

-  

(733)

(733)

(694)

(1,427)

Other reserve movements

-  

-  

-  

-  

-  

(138)

(137)

Balance as at 31 December 2012

12,477 

527 

2,099 

59 

989 

34,464 

50,615 

9,371 

59,986 


  

  

  

  

  





Balance as at 1 January 2011

12,339 

(1,355)

152 

2,357 

600 

34,743 

48,836 

11,404 

60,240 

Profit after tax

-  

-  

-  

-  

-  

2,924 

2,924 

944 

3,868 

Currency translation movements

-  

-  

-  

(1,009)

-  

-  

(1,009)

(598)

(1,607)

Available for sale investments

-  

1,380 

-  

-  

-  

-  

1,380 

(6)

1,374 

Cash flow hedges

-  

-  

1,290 

-  

-  

-  

1,290 

(27)

1,263 

Pension remeasurement

-  

-  

-  

-  

-  

831 

831 

-  

831 

Other

-  

-  

-  

-  

-  

(92)

(92)

18 

(74)

Total comprehensive income/(loss) for the year

-  

1,380 

1,290 

(1,009)

-  

3,663 

5,324 

331 

5,655 

Issue of shares under employee share schemes

41 

-  

-  

-  

-  

838 

879 

-  

879 

Increase in treasury shares

-  

-  

-  

-  

(165)

-  

(165)

-  

(165)

Vesting of shares under employee share schemes

-  

-  

-  

-  

499 

(499)

-  

-  

-  

Dividends paid

-  

-  

-  

-  

-  

(660)

(660)

(727)

(1,387)

Redemption of Reserve Capital Instruments

-  

-  

-  

-  

-  

-  

-  

(1,415)

(1,415)

Other reserve movements

-  

-  

-  

-  

88 

50 

138 

14 

152 

Balance as at 31 December 2011

12,380 

25 

1,442 

1,348 

1,022 

38,135 

54,352 

9,607 

63,959 

 

 

 

 

 

 

 

Notes

a For further details refer to Note 33.

b For further details refer to Note 34.


 

Consolidated Statements of Changes in Equity 
 

 


  

  

  

  

  






Called up

share

capital

and share

premiuma

Available

for sale

reserveb

Cash

flow

hedging

reserveb

Currency

translation

reserveb

Other

reserves and treasury sharesb

Retained

earnings

Total

 

Non-

controlling

interests

 

Total

equity

 


£m

£m

£m

£m

£m

£m

£m

£m

£m

Balance as at 1 January 2010

10,804 

(110)

252 

1,615 

871 

31,408 

44,840 

11,201 

56,041 

Profit after tax

-  

-  

-  

-  

-  

3,514 

3,514 

985 

4,499 

Currency translation movements

-  

-  

-  

742 

-  

-  

742 

442 

1,184 

Available for sale investments

-  

(1,245)

-  

-  

-  

-  

(1,245)

(1,236)

Cash flow hedges

-  

-  

(100)

-  

-  

-  

(100)

56 

(44)

Pension remeasurement

-  

-  

-  

-  

-  

501 

501 

-  

501 

Other

-  

-  

-  

-  

-  

14 

14 

45 

59 

Total comprehensive (loss)/income for the year

-  

(1,245)

(100)

742 

-  

4,029 

3,426 

1,537 

4,963 

Issue of new ordinary shares

1,500 

-  

-  

-  

-  

-  

1,500 

-  

1,500 

Issue of shares under employee share schemes

35 

-  

-  

-  

-  

830 

865 

-  

865 

Increase in treasury shares

-  

-  

-  

-  

(989)

-  

(989)

-  

(989)

Vesing of shares under employee share schemes

-  

-  

-  

-  

718 

(718)

-  

-  

-  

Dividends paid

-  

-  

-  

-  

-  

(531)

(531)

(803)

(1,334)

Redemption of Reserve Capital Instruments

-  

-  

-  

-  

-  

-  

-  

(487)

(487)

Other reserve movements

-  

-  

-  

-  

-  

(275)

(275)

(44)

(319)

Balance as at 31 December 2010

12,339 

(1,355)

152 

2,357 

600 

34,743 

48,836 

11,404 

60,240 

 

 

 

 

 

Notes

a For further details refer to Note 33.

b For further details refer to Note 34.

            Consolidated cash flow statement

For the year ended 31 December

2012 

2011 

2010 


£m

£m

£m

Continuing operations




Reconciliation of profit before tax to net cash flows from operating activities:




Profit before tax

 797 

 5,770 

 5,999 

Adjustment for non-cash items:




Allowance for impairment

 3,364 

 5,602 

 5,672 

Depreciation, amortisation and impairment of property, plant, equipment and intangibles

 1,119 

 1,104 

 1,346 

Other provisions, including pensions

 3,080 

 1,787 

 914 

Net profit on disposal of investments and property, plant and equipment

 (679)

 (1,645)

 (1,057)

Other non-cash movements

 2,608 

 1,454 

 (5,838)

Changes in operating assets and liabilities




Net decrease/(increase) in loans and advances to banks and customers

 5,932 

 (13,836)

 (875)

Net (increase)/decrease in reverse repurchase agreements and other similar lending

 (22,857)

 52,176 

 (62,337)

Net (decrease)/increase in deposits and debt securities in issue

 (4,944)

 6,712 

 36,958 

Net increase /(decrease) in repurchase agreements and other similar borrowing

 9,886 

 (18,266)

 26,753 

Net decrease/(increase) in derivative financial instruments

 4,619 

 3,730 

 (1,298)

Net decrease/(increase) in trading assets

 5,571 

 21,360 

 (17,505)

Net (decrease)/increase in trading liabilities

 (973)

 (26,899)

 21,441 

Net (increase)/decrease in financial investments

 (19,125)

 (4,255)

 11,126 

Net decrease in other assets

 533 

 119 

 1,366 

Net (decrease) in other liabilities

 (1,082)

 (4,148)

 (2,521)

Corporate income tax paid

 (1,516)

 (1,686)

 (1,458)

Net cash from operating activities

 (13,667)

 29,079 

 18,686 

Purchase of available for sale investments

 (80,797)

 (67,525)

 (76,418)

Proceeds from sale or redemption of available for sale investments

 73,773 

 66,941 

 71,251 

Purchase of property, plant and equipment

 (604)

 (1,454)

 (1,767)

Other cash flows associated with investing activities

 471 

 126 

 1,307 

Net cash from investing activities

 (7,157)

 (1,912)

 (5,627)

Dividends paid

 (1,427)

 (1,387)

 (1,307)

Proceeds of borrowings and issuance of subordinated debt

 2,258 

 880 

 2,131 

Repayments of borrowings and redemption of subordinated debt

 (2,680)

 (4,003)

 (1,211)

Net issue of shares and other equity instruments

 97 

 41 

 1,535 

Net (purchase)/disposal of treasury shares

 (979)

 (235)

 (989)

Net redemption of shares issued to non-controlling interests

 (111)

 (1,257)

 - 

Net cash from financing activities

 (2,842)

 (5,961)

 159 

Effect of exchange rates on cash and cash equivalents

 (4,111)

 (2,933)

 3,842 

Net (decrease)/increase in cash and cash equivalents

 (27,777)

 18,273 

 17,060 

Cash and cash equivalents at beginning of year

 149,673 

 131,400 

 114,340 

Cash and cash equivalents at end of year

 121,896 

 149,673 

 131,400 

Cash and cash equivalents comprise:




Cash and balances at central banks

 86,191 

 106,894 

 97,630 

Loans and advances to banks with original maturity less than three months

 33,473 

 40,481 

 31,934 

Available for sale treasury and other eligible bills with original maturity less than three months

 2,228 

 2,209 

 1,667 

Trading portfolio assets with original maturity less than three months

 4 

 89 

 169 

 

Interest received in 2012 was £24,431m (2011: £28,673m 2010, £28,631m) and interest paid in 2012 was £16,705m (2011: £20,106m, 2010: £20,759m). The Group is required to maintain balances with central banks and other regulatory authorities and these amounted to £5,169m at 31 December 2012 (2011: £4,364m, 2010: £5,244m) a.

 

For the purposes of the cash flow statement, cash comprises cash on hand and demand deposits, and cash equivalents comprise highly liquid investments that are convertible into cash with an insignificant risk of changes in value with original maturities of three months or less.  Repurchase and reverse repurchase agreements are not considered to be part of cash equivalents.

 

 

 

 

 

Note

a Amounts have been restated to include additional balances (2011: £1,864m; 2010: £2,934m) held with central banks and other regulatory authorities.

             Parent Company Accounts


  

  

  

  

  





Income statement

2012 

2011 

2010 

For the year ended 31 December

£m

£m

£m

Dividends received from subsidiary

696  

643  

235  

Other income

16  

-  

-  

Interest income

4  

5  

5  

Management charge from subsidiary

(5)

(5)

(5)

Profit before tax

711  

643  

235  

Tax

(4)

-  

-  

Profit after tax

707  

643  

235  

 

Profit after tax and total comprehensive income for the year was £707m (2011: £643m, 2010: £235m). There were no other components of total comprehensive income other than the profit after tax.

 

The Company had no staff during the year (2011: nil, 2010: nil).

 

Balance sheet


2012 

2011

As at 31 December

Notes

£m

£m

Assets




Cash and balances at central banks


-  

1  

Investments in subsidiaries

39

21,429  

21,429  

Derivative financial instrumenta


422  

-  

Other assets


86  

24  

Total assets


21,937  

21,454  

  




Liabilities




Deposits from Banks


409  

-  

Other liabilities


3  

-  

Total liabilities


412  

-  

  




Shareholders' equity




Called up share capital

33

3,061  

3,050  

Share premium account

33

9,416  

9,330  

Capital redemption reserve


394  

394  

Retained earnings


8,654  

8,680  

Total shareholders' equity


21,525  

21,454  

Total liabilities and shareholders' equity


21,937  

21,454  

 

The financial statements on pages 15 to 100 were approved by the Board Audit Committee under the authority of the Board of Directors on 29 August 2013 and signed on behalf of the company by:

 

Sir David Walker

Group Chairman

 

Antony Jenkins

Group Chief Executive

 

 

 

 

 

 

 

 

Notes

a The derivative financial instrument held by Barclays PLC (the Parent company) represents Barclays PLC's right to receive a Capital Note for no additional consideration, in the event the Barclays PLC consolidated Core Tier 1 (CT1) or Common Equity Tier 1 (CET1) ratio, as appropriate, falls below 7%, at which point the notes are automatically assigned by the holders to Barclays PLC.

 

Parent Company Accounts

 


 

Statement of changes in equity


Called up

share capital

and share

premiuma

Capital

reserves and

other equity

Retained

earnings

Total equity


Notes

£m

£m

£m

£m

Balance as at 1 January 2012


12,380 

394 

8,680 

21,454 

Profit after tax and total comprehensive income


-  

-  

707 

707 

Issue of shares under employee share schemes


97 

-  

-  

97 

Dividends

12

-  

-  

(733)

(733)

Balance as at 31 December 2012


12,477 

394 

8,654 

21,525 







Balance as at 1 January 2011


12,339 

394 

8,710 

21,443 

Profit after tax and total comprehensive income


-  

-  

643 

643 

Issue of shares under employee share schemes


41 

-  

-  

41 

Dividends

12

-  

-  

(670)

(670)

Other


-  

-  

(3)

(3)

Balance as at 31 December 2011


12,380 

394 

8,680 

21,454 

 

Cash flow statement


2012 

2011 

2010 

For the year ended 31 December


£m

£m

£m

Reconciliation of profit before tax to net cash flows from operating activities:





Profit before tax


711 

643 

235 

Changes in operating assets and liabilities


(72)

(14)

15 

Other non-cash movements


(4)

Corporate income tax paid


(28)

Net cash from operating activities


635 

629 

222 

Capital contribution to subsidiaries


-

(1,214)

Net cash used in investing activities


(1,214)

Issue of shares and other equity instruments


97 

41 

1,535 

Dividends paid


(733)

(670)

(543)

Net cash from financing activities


(636)

(629)

992 

Net decrease in cash and cash equivalents


(1)

Cash and cash equivalents at beginning of year


Cash and cash equivalents at end of yearb


  





Net cash from operating activities includes:





Dividends received


696 

643 

235 

Interest received


 

The Parent Company's principal activity is to hold the investment in its wholly-owned subsidiary, Barclays Bank PLC. Dividends received are treated as operating income.

 

The Company was not exposed at 31 December 2012 or 2011 to significant risks arising from the financial instruments it holds, which comprised cash, balances with central banks and other assets which had no credit or market risk.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes

a Details of share capital and share premium are shown in Note 33.

b Comprising cash and balances at central banks.




 

[Page left blank for pagination purposes]



 

               Notes to the Financial Statements  

 

Significant accounting policies

 

This section describes Barclays significant accounting policies and critical accounting estimates that relate to the financial statements and notes as a whole. If an accounting policy or a critical accounting estimate relates to a specific note, the applicable accounting policy and/or critical accounting estimate is contained within the relevant note.

 


1 Significant accounting policies

 

1. Reporting entity

These financial statements are prepared for Barclays PLC and its subsidiaries (the Barclays PLC Group or the Group) under Section 399 of the Companies Act 2006. The Group is a major global financial services provider engaged in retail banking, credit cards, wholesale banking, investment banking, wealth management and investment management services. In addition, individual financial statements have been presented for the holding company.

 

2. Compliance with International Financial Reporting Standards

The consolidated financial statements of the Group, and the individual financial statements of Barclays PLC, have been prepared as described in the basis of preparation described on page 4 in accordance with International Financial Reporting Standards (IFRS) and interpretations (IFRICs) issued by the Interpretations Committee, as published by the International Accounting Standards Board (IASB). They are also in accordance with IFRS and IFRIC interpretations endorsed by the European Union. The principal accounting policies applied in the preparation of the consolidated and individual financial statements are set out below, and in the relevant notes to the financial statements. These policies have been consistently applied.

 

As explained in the basis of preparation on page 4, these financial statements have been restated solely to show the effects of the adoption of IFRS 10 Consolidated Financial Statements and IAS 19 Employee Benefits (Revised 2011) on 1 January 2013 in accordance with their transition guidance and not to reflect events subsequent to 5 March 2013, the date of the approval of the 31 December 2012 financial statements. The Group's segmental disclosures required by IFRS 8 Operating Segments have also been restated for all periods presented to reflect changes made in 2013 to the allocation of Head Office results to businesses and portfolio restatements between the businesses, as described on pages 6-7.

 

3. Basis of preparation

The consolidated and individual financial statements have been prepared under the historical cost convention modified to include the fair valuation of investment property and particular financial instruments to the extent required or permitted under IFRS as set out in the relevant accounting policies. They are stated in millions of pounds Sterling (£m), the functional currency of Barclays PLC.

 

These restated financial statements have been prepared in accordance with the basis of preparation as described on page 4, including not having been updated for any subsequent events occurring between 5 March 2013 and 29 August 2013.

 

4. Accounting policies

Barclays prepares financial statements in accordance with IFRS. The Group's significant accounting policies relating to specific financial statement items, together with a description of the accounting estimates and judgements that were critical to preparing them, are set out under the relevant notes. Accounting policies that affect the financial statements as a whole are set out below.

 

(i) Consolidation

Barclays applies IFRS 10 Consolidated Financial Statements.  

 

The consolidated financial statements combine the financial statements of Barclays PLC and all its subsidiaries. Subsidiaries are entities over which Barclays PLC has control. The Group has control over another entity when the Group has all of the following elements:

 

1) power over the relevant activities of the investee, for example through voting or other rights;

2) exposure to, or rights to, variable returns from its involvement with the investee; and

3) the ability to affect those returns through its power over the investee.

 

The assessment of control is based on the consideration of all facts and circumstances. The Group reassesses whether it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control.

 

Intra-group transactions and balances are eliminated on consolidation and consistent accounting policies are used throughout the Group for the purposes of the consolidation.

 

Changes in ownership interests in subsidiaries are accounted for as equity transactions if they occur after control has already been obtained and they do not result in loss of control.

 

Details of the principal subsidiaries are given in Note 39.

 

(ii) Foreign currency translation

The Group applies IAS 21 The Effects of Changes in Foreign Exchange Rates. Transactions and balances in foreign currencies are translated into Sterling at the rate ruling on the date of the transaction. Foreign currency balances are translated into Sterling at the period end exchange rates. Exchange gains and losses on such balances are taken to the income statement.

 

The Group's foreign operations (including subsidiaries, joint ventures, associates and branches) based mainly outside the UK may have different functional currencies. The functional currency of an operation is the currency of the main economy to which it is exposed.

 

 

 

 

 

 

 

 

1 Significant accounting policies continued

 

Prior to consolidation (or equity accounting) the assets and liabilities of non-Sterling operations are translated at the closing rate and items of income, expense and other comprehensive income are translated into Sterling at the rate on the date of the transactions. Exchange differences arising on the translation of foreign operations are included in currency translation reserves within equity. These are transferred to the income statement when the Group loses control, joint control or significant influence over the foreign operation or on partial disposal of the operation.

 

(iii) Financial assets and liabilities

The Group applies IAS 39 Financial Instruments: Recognition and Measurement for the recognition, classification and measurement and derecognition of financial assets and financial liabilities, for the impairment of financial assets, and for hedge accounting.

 

Recognition

The Group recognises financial assets and liabilities when it becomes a party to the terms of the contract, which is the trade date or the settlement date.

 

Classification and measurement

Financial assets and liabilities are initially recognised at fair value and may be held at fair value or amortised cost depending on the Group's intention toward the assets and the nature of the assets and liabilities, mainly determined by their contractual terms.

 

The accounting policy for each type of financial asset or liability is included within the relevant note for the item. The Group's policies for determining the fair values of the assets and liabilities are set out in Note 18.

 

Derecognition

The Group derecognises a financial asset, or a portion of a financial asset, from its balance sheet where the contractual rights to cash flows from the asset have expired, or have been transferred, usually by sale, and with them either substantially all the risks and rewards of the asset or significant risks and rewards, along with the unconditional ability to sell or pledge the asset.

 

Financial liabilities are de-recognised when the liability has been settled, has expired or has been extinguished. An exchange of an existing financial liability for a new liability with the same lender on substantially different terms - generally a difference of 10% in the present value of the cash flows - is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability.

 

Critical accounting estimates and judgements

Transactions in which the Group transfers assets and liabilities, portions of them, or financial risks associated with them can be complex and it may not be obvious whether substantially all of the risks and rewards have been transferred. It is often necessary to perform a quantitative analysis. Such an analysis compares the Group's exposure to variability in asset cash flows before the transfer with its retained exposure after the transfer.

 

A cash flow analysis of this nature may require judgement. In particular, it is necessary to estimate the asset's expected future cash flows as well as potential variability around this expectation. The method of estimating expected future cash flows depends on the nature of the asset, with market and market-implied data used to the greatest extent possible. The potential variability around this expectation is typically determined by stressing underlying parameters to create reasonable alternative upside and downside scenarios. Probabilities are then assigned to each scenario. Stressed parameters may include default rates, loss severity or prepayment rates.

 

(iv) Issued debt and equity instruments

The Group applies IAS 32, Financial Instruments: Presentation, to determine whether funding is either a financial liability (debt) or equity.

 

Issued financial instruments or their components are classified as liabilities if the contractual arrangement results in the Group having a present obligation to either deliver cash or another financial asset, or a variable number of equity shares, to the holder of the instrument, if this is not the case, the instrument is generally an equity instrument and the proceeds included in equity, net of transaction costs. Dividends and other returns to equity holders are recognised when paid or declared by the members at the annual general meeting and treated as a deduction from equity.

Where issued financial instruments contain both liability and equity components, these are accounted for separately. The fair value of the debt is estimated first and the balance of the proceeds is included within equity.

5. Future accounting developments

As at 31 December 2012 the IASB had issued the following accounting standards, which have not been reflected in these restated financial statements:

-IFRS 12 Disclosures of Interests in Other Entities  This requires disclosures in respect of interests in, and risks arising, from subsidiaries, joint ventures, associates and structured entities whether consolidated or not. As a disclosure only standard it will have no financial impact.   This standard is applicable for periods beginning on or after 1 January 2013.  As explained on page 4 these financial statements have not been restated to include the disclosures required by IFRS 12; and

-IAS 32 Amendments Offsetting Financial Assets and Financial Liabilities.  The circumstances in which netting is permitted have been clarified. The clarifications are effective from 1 January 2014.

IFRS 13 Fair value measurement   This provides comprehensive guidance on how to calculate the fair value of financial and non financial assets and liabilities. IFRS 13 is applied prospectively from 1 January 2013. The effects of adoption were not material to the Group. As explained on page 4 these financial statements have not been restated to include the disclosures required by IFRS 13.

 

 

 

 

 

 

 

1 Significant accounting policies continued

In 2009 and 2010, the IASB issued IFRS 9 Financial Instruments which contains new requirements for accounting for financial assets and liabilities, and will contain new requirements for impairment and hedge accounting, replacing the corresponding requirements in IAS 39. It will lead to significant changes in the way that the Group accounts for financial instruments. The key changes issued and proposed relate to:

-Financial assets. Financial assets will be held at either fair value or amortised cost, except for equity investments not held for trading and certain eligible debt instruments, which may be held at fair value through other comprehensive income;

-Financial liabilities. Gains and losses on fair value changes in own credit arising on non-derivative financial liabilities designated at fair value through profit or loss will be excluded from the Income Statement and instead taken to other comprehensive income;

-Impairment. Credit losses expected (rather than only losses incurred in the year) on loans, debt securities and loan commitments not held at fair value through profit or loss will be reflected in impairment allowances; and

-Hedge accounting. Hedge accounting will be more closely aligned with financial risk management.

Adoption is not mandatory until periods beginning on or after 1 January 2015, subject to EU endorsement. Earlier adoption is possible, subject to endorsement. At this stage, it is not possible to determine the potential financial impacts of adoption on the Group.

In addition, the IASB has indicated that it will issue a new standard on accounting for leases. Under the proposals, lessees would be required to recognise assets and liabilities arising from both operating and finance leases on the balance sheet. The IASB also plans to issue new standards on insurance contracts and revenue recognition. The Group will consider the financial impacts of these new standards as they are finalised.

Critical accounting estimates and judgements

The preparation of financial statements in accordance with IFRS requires the use of estimates. It also requires management to exercise judgement in applying the accounting policies.

 

Determining whether the Group has control of an entity, particularly a structured entity, may involve significant judgment.  This judgment may involve assessing the purpose and design of the entity, determining the relevant activities of the entity and the level of the Group's influence over them, and assessing the extent to which the Group is exposed to and can influence the variable returns from the entity.  It will also often be necessary to consider whether the Group, or another involved party with power over the relevant activities, is acting as an agent on behalf of others or as a principal investor. 

 

There is also often considerable judgment involved in the ongoing assessment of control of structured entities.  In this regard, where market conditions have deteriorated such that the other investors' exposures to variable returns have been substantively eroded, the Group may conclude that the managers of the structured entity are acting de-facto under its direction as the sole remaining investor and therefore will consolidate the structured entity. Upon initial adoption of IFRS 10, the Group consolidated several securitisation vehicles on this basis, recognising a £382m decrease in total equity due to the consolidation of these entities as at 31 December 2012.

 

The key areas involving a higher degree of judgement or complexity, or areas where assumptions are significant to the consolidated and individual financial statements are highlighted under the relevant note. Critical accounting estimates and judgements are disclosed in:


Page


Page

Credit impairment charges and impairment on available for sale investments

26

Goodwill and intangible assets

62

Tax

28

Provisions

67

Available-for-sale investments

39

Pensions and post-retirement benefits

84

Fair value of financial instruments

40




[Page left blank for pagination purposes]



 

Performance

 

The notes included in this section focus on the results and performance of the Group. Information on the income generated, expenditure incurred, segmental performance, tax, earnings per share and dividends are included here.


 

2 Segmental reporting

Presentation of segmental reporting

The Group's segmental reporting is in accordance with IFRS 8 Operating Segments. Operating segments are reported in a manner consistent with the internal reporting provided to the Executive Committee, which is responsible for allocating resources and assessing performance of the operating segments and has been identified as the chief operating decision maker. All transactions between business segments are conducted on an arm's length basis, with intra-segment revenue and costs being eliminated in Head Office. Income and expenses directly associated with each segment are included in determining business segment performance.

 

Analysis of results by business

UK                                           RBB

Europe RBB

Africa RBB

Barclaycard

Investment

Bank

Corporate

Banking

Wealth and Investment Management

Head Office

Functions

and Other

Operations

Total


£m

£m

£m

£m

£m

£m

£m

£m

£m

As at 31 December 2012










Total income net of insurance claimsa

4,384 

708 

2,928 

4,344 

11,775 

3,046 

1,820 

(3,996)

25,009 

Credit impairment charges and other provisionsb

(269)

(257)

(632)

(1,049)

(204)

(885)

(38)

(6)

(3,340)

Operating expensesc,d,e

(4,074)

(807)

(1,984)

(2,262)

(7,631)

(2,561)

(1,509)

(184)

(21,012)

Other income/(losses)f

13 

10 

29 

50 

10 

23 

140 

Profit /(loss) before tax from continuing operations

45 

(343)

322 

1,062 

3,990 

(390)

274 

(4,163)

797 

Total assets  

134,554 

46,119 

42,228 

38,156 

1,073,663 

87,841 

24,480 

41,294 

1,488,335 

As at 31 December 2011










Total income net of insurance claimsa

4,621 

1,004 

3,364 

4,305 

10,222 

3,315 

1,770 

3,691 

32,292 

Credit impairment charges and other provisionsb

(536)

(207)

(462)

(1,312)

(93)

(1,150)

(41)

(1,801)

(5,602)

Operating expensesc,d,e

(3,266)

(1,576)

(2,177)

(2,459)

(7,726)

(2,099)

(1,538)

(45)

(20,886)

Other income/(losses)f

12 

31 

12 

(71)

(3)

(23)

(34)

Profit /(loss) before tax from continuing operations

822 

(767)

730 

565 

2,415 

(5)

188 

1,822 

5,770 

Total assets  

127,123 

50,243 

45,852 

34,780 

1,158,706 

92,890 

20,821 

31,668 

1,562,083 

As at 31 December 2010










Total income net of insurance claimsa

4,456 

931 

3,237 

4,268 

13,265 

3,302 

1,581 

400 

31,440 

Credit impairment charges and other provisionsb

(819)

(255)

(561)

(1,747)

(543)

(1,697)

(48)

(2)

(5,672)

Operating expensesc,d,e

(2,899)

(963)

(2,217)

(1,720)

(8,617)

(2,186)

(1,400)

(35)

(20,037)

Other income/(losses)f

99 

44 

84 

25 

18 

(2)

268 

Profit /(loss) before tax from continuing operations

837 

(243)

543 

826 

4,123 

(583)

133 

363 

5,999 

Total assets  

121,908 

52,557 

56,180 

31,429 

1,094,742 

90,026 

17,869 

25,569 

1,490,280 

 

 

 

 

 

 

 

 

Notes

a The impact of own credit movements in the fair value of structured note issuance is a charge of £4,579m (2011: gain of £2,708m; 2010: gain of £391m) is  included within the results of Head Office Functions and Other Operations. This reflects the fact that these fair value movements relate to the credit worthiness of the issuer as a whole. Furthermore, delays to planned changes in accounting standards will mean own credit movements are likely to continue to be reflected in the income statement for the foreseeable future.

b Credit impairment charges included £nil (2011: £1,800m, 2010: £nil) impairment on the investment in BlackRock, Inc. within the results of Head Office Functions and Other Operations.

c The UK bank levy of £345m (2011: £325m, 2010: £nil) is allocated to businesses by way of the Head Office allocations.

d The provision for PPI redress of £1,600m is reported under UK RBB £1,180m (2011: £400m, 2010: £nil) and Barclaycard £420m (2011: £600m, 2010: £nil).

e The impairment of goodwill is £nil (2011: £597m, 2010: £243m) relates to Europe RBB £nil (2011: £427m, 2010: £nil), Corporate Banking £nil (2011: £123m, 2010: £243m) and Barclaycard £nil (2011: £47m, 2010: £nil).

f Other income/(losses) represents: share of post-tax results of associates and joint ventures; profit or (loss) on disposal of subsidiaries, associates and joint ventures; and gains on

    acquisitions.



 

2 Segmental reporting continued

The Group's activities have been organised under the following business groupings:

 

-    UK RBB is a leading UK high street bank providing current account and savings products and Woolwich branded mortgages. UK RBB also provides unsecured loans and general insurance as well as banking and money transmission services to small and medium sized businesses. UK RBB was previously named UK Retail Banking;

-    Europe RBB provides retail services, as well as business lending to small and medium sized enterprises, through a variety of distribution channels. Europe RBB was previously named Western Europe Retail Banking;

-    Africa RBB provides retail and corporate across Africa and the Indian Ocean. Africa RBB combines the operations previously reported as Barclays Africa and Absa;

-    Barclaycard is an international payments services provider for consumer and business customers including credit cards and consumer lending;

-    The Investment Bank division of Barclays provides large corporate, government and institutional clients with a full spectrum of solutions to meet their strategic advisory, financing and risk management needs;

-    Corporate Banking provides integrated banking solutions to large corporates, financial institutions and multinationals in the UK and internationally;

-    Wealth and Investment Management focuses on private and intermediary clients worldwide, providing international and private banking, investment management, fiduciary services and brokerage; and

-    Head Office Functions and Other Operations comprise head office and central support functions, businesses in transition and consolidation adjustments.

 

  


Statutory

Income by Geographic Regiona


2012 

2011 

2010 



£m

£m

£m

Continuing operations





UK


7,461 

15,819 

12,714 

Europe  


4,457 

4,207 

4,828 

Americas


7,554 

6,025 

7,742 

Africa and Middle East


4,472 

4,967 

4,997 

Asia   


1,065 

1,274 

1,159 

Total


25,009 

32,292 

31,440 

 

Statutory income from individual countries which represent more than 5% of total incomea

2012 

2011 

2010 


£m

£m

£m

Continuing operations




UK

7,461 

15,819 

12,714 

US

7,333 

5,802 

7,172 

South Africa

3,700 

3,942 

3,684 

 

 

.

 

 

a Total income net of insurance claims based on counterparty location.



 

3 Net interest income

Accounting for interest income and expense

The Group applies IAS 39 Financial Instruments: Recognition and Measurement. Interest income on loans and advances at amortised cost, available for sale debt investments, and interest expense on financial liabilities held at amortised cost, are calculated using the effective interest method which allocates interest, and direct and incremental fees and costs, over the expected lives of the assets and liabilities.

 

The effective interest method requires the Group to estimate future cash flows, in some cases based on its experience of customers' behaviour, considering all contractual terms of the financial instrument, as well as the expected lives of the assets and liabilities. Due to the large number of products and types (both assets and liabilities), there are no individual estimates that are material to the results or financial position.

 

See also Note 14 - Financial assets designated at fair value and Note 17 - Financial liabilities designated at fair value for relevant accounting policies.

 


2012 

2011 

2010 


£m

£m

£m

Cash and balances with central banks

 253 

 392 

 271 

Available for sale investments

 1,736 

 2,137 

 1,483 

Loans and advances to banks

 376 

 350 

 440 

Loans and advances to customers

 16,448 

 17,271 

 17,677 

Other

 398 

 439 

 164 

Interest income

 19,211 

 20,589 

 20,035 

Deposits from banks

 (257)

 (366)

 (370)

Customer accounts

 (2,485)

 (2,526)

 (1,410)

Debt securities in issue

 (2,921)

 (3,524)

 (3,632)

Subordinated liabilities

 (1,632)

 (1,813)

 (1,778)

Other

 (262)

 (159)

 (322)

Interest expense

 (7,557)

 (8,388)

 (7,512)

Net interest income

 11,654 

 12,201 

 12,523 

 

Interest income includes £211m (2011: £243m, 2010: £213m) accrued on impaired loans.

 

Other interest income principally includes interest income relating to reverse repurchase agreements and hedging activity. Similarly, other interest expense principally includes interest expense relating to repurchase agreements and hedging activity.

 

Included in net interest income is hedge ineffectiveness as detailed on page 38.

 

2012

Net interest income declined by 4% to £11,654m. Interest income decreased by 7% to £19,211m, driven by a reduction in income from loans and advances to customers, which fell £823m to £16,448m, and interest income derived from available for sale investments, which fell £401m to £1,736m. The decrease in interest income from loans and advances to customers is attributable primarily to the Investment Bank and Africa RBB reflecting lower average loan balances.  These movements were partly offset by a £110m increase in Barclaycard reflecting increased average loan balances due to the Egg acquisition. The fall in interest from available for sale investments primarily reflects lower average balances and yield in the Investment Bank and lower yields on government bonds held in the Liquidity Risk Appetite portfolio. Interest expense reduced by 10% to £7,557m, driven by a reduction in interest on debt securities in issue of £603m to £2,921m due to lower average balances and lower yields, and a reduction in interest on subordinated liabilities of £181m to £1,632m due to lower average balances.

 

The net interest margin for Retail and Business Banking,  Barclaycard, Corporate Banking and Wealth and Investment Management decreased to 1.84% (2011: 2.03%), primarily reflecting the reduction in contribution from Group hedging activities.

 

2011

Net interest income decreased £322m to £12,201m. Interest income rose 3% to £20,589m reflecting an increase in interest income derived from available for sale investments of £654m, predominantly as a result of the expansion of the Liquidity Risk Appetite portfolio during the year. This was largely offset by a decrease in interest income from loans and advances to customers primarily as a result of lower average balances in the Investment Bank (excluding settlement balances and cash collateral), offset partially by increased lending across the majority of other businesses. The increase in interest expense was driven primarily by a reduction in benefits from Group hedging activities.

 

The net interest margin for Retail and Business Banking, Barclaycard, Corporate Banking, and Wealth and Investment Management remained stable at 2.03% (2010: 2.03%).

 

 

 

 


4 Net fee and commission income

Accounting for net fee and commission income

The Group applies IAS 18 Revenue. Fees and commissions charged for services provided or received by the Group are recognised as the services are provided, for example on completion of the underlying transaction.

 


2012 

2011 

2010 


£m

£m

£m

Banking, investment management and credit related fees and commissions

9,945 

9,958 

10,142 

Brokerage fees

92 

87 

77 

Foreign exchange commission

176 

163 

149 

Fee and commission income

10,213 

10,208 

10,368 

Fee and commission expense

(1,677)

(1,586)

(1,497)

Net fee and commission income

8,536 

8,622 

8,871 

 

2012

Net fee and commission income remained stable with a £86m decline to £8,536m. Higher fees as a result of increased volumes within the Barclaycard Business Payment and US portfolios and growth in debt and equity underwriting activity were offset by lower commissions mainly from Italy mortgage sales and the impact of adverse currency movements in Africa RBB.

 

2011

Net fee and commission income declined £249m to £8,622m, primarily due to financial advisory and debt underwriting income within the Investment Bank being impacted by lower deal activity.


 

5 Net trading income

Accounting for net trading income

In accordance with IAS 39, trading positions are held at fair value and the resulting gains and losses are included in the income statement, together with interest and dividends arising from long and short positions and funding costs relating to trading activities.

 

Income arises from both the sale and purchase of trading positions, margins which are achieved through market-making and customer business and from changes in fair value caused by movements in interest and exchange rates, equity prices and other market variables.

 

Own credit gains/losses arise from the fair valuation of financial liabilities designated at fair value through profit or loss. See Note 17 Financial liabilities designated at fair value.

 


2012 

2011 

2010 


£m

£m

£m

Trading income

7,926 

 4,952 

7,687 

Own credit (losses)/gains

(4,579)

2,708 

391 

Net trading income

3,347 

 7,660 

 8,078 

 

Included within net trading income were gains of £656m (2011: £16m loss, 2010: £32m gain) on financial assets designated at fair value and losses of £3,980m (2011: £3,850m gain, 2010: £903m loss) on financial liabilities designated at fair value.

 

2012

Net trading income decreased 56% to £3,347m, primarily reflecting a £7,287m variance in own credit (2012: £4,579m charge; 2011: £2,708m gain) as a result of improved credit spreads on Barclays issued debt. This was offset partially by a £2,974m increase in underlying trading income, reflecting increased liquidity and higher client volumes across a number of product areas in Fixed Income, Commodities and Currencies and an improved performance in cash equities and equity derivatives in Equities and Prime Services.

 

2011

Net trading income decreased £418m to £7,660m. Trading income, which primarily arises in the Investment Bank, decreased 36% to £4,952m reflecting lower contributions from Commodities and Fixed Income Rates and Credit, partially offset by an increase in Currency that benefitted from market volatility and strong client volumes. The impact from difficult trading conditions was partially offset by a gain on own credit of £2,708m (2010: £391m).


 

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 investments, and Note 14, Financial assets designated at fair value.

 


2012 

2011 

2010 


£m

£m

£m

Net gain from disposal of available for sale investments

452 

1,645 

1,027 

Dividend income

42 

129 

116 

Net gain from financial instruments designated at fair value

233 

287 

274 

Other investment income

117 

244 

60 

Net investment income

844 

2,305 

1,477 

 

2012

Net investment income decreased by £1,461m to £844m largely driven by the non-recurrence of gains on disposal of the economic structural hedge portfolio during 2011 and a reduction in dividends following the disposal of the Group's stake in BlackRock, Inc. during the first half of 2012.

 

2011

Net investment income increased by £828m to £2,305m due to the gains on the sale of hedging instruments held as part of the economic structural hedge portfolio and increases in income from investment properties.


 

7 Credit impairment charges and impairment on available for sale investments

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 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; and

§ 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.


Available for sale investments

Impairment of available for sale debt instruments

Debt instruments are assessed for impairment in the same way as loans. If impairment is deemed to have occurred, the cumulative decline in the fair value of the instrument that has previously been recognised in equity is removed from equity and recognised in the income statement. This may be reversed if there is evidence that the circumstances of the issuer have improved.



 

7 Credit impairment charges and impairment on available for sale investments continued

Impairment of available for sale equity instruments

Where there has been a prolonged or significant decline in the fair value of an equity instrument below its acquisition cost, it is deemed to be impaired. The cumulative net loss that has been previously recognised directly in equity is removed from equity and recognised in the income statement.

 

Increases in the fair value of equity instruments after impairment are recognised directly in other comprehensive income. Further declines in the fair value of equity instruments after impairment are recognised in the income statement.

 

Critical accounting estimates and judgements

The calculation of the impairment allowance involves the use of judgement, based on the Group's experience of managing credit risk.

 

Within the retail and small businesses portfolios, which comprise large numbers of small homogeneous assets with similar risk characteristics where credit scoring techniques are generally used, statistical techniques are used to calculate impairment allowances on a portfolio basis, based on historical recovery rates and assumed emergence periods. These statistical analyses use as primary inputs the extent to which accounts in the portfolio are in arrears and historical information on the eventual losses encountered from such delinquent portfolios. There are many such models in use, each tailored to a product, line of business or customer category. Judgement and knowledge is needed in selecting the statistical methods to use when the models are developed or revised. The impairment allowance reflected in the financial statements for these portfolios is therefore considered to be reasonable and supportable. The impairment charge reflected in the income statement for these retail portfolios is £2,075m (2011: £2,477m; 2010: £3,379m) and amounts to 63% (2011: 65%; 2010: 60%) of the total impairment charge on loans and advances.

 

For individually significant assets, impairment allowances are calculated on an individual basis and all relevant considerations that have a bearing on the expected future cash flows are taken into account (for example, the business prospects for the customer, the realisable value of collateral, the Group's position relative to other claimants, the reliability of customer information and the likely cost and duration of the work-out process). The level of the impairment allowance is the difference between the value of the discounted expected future cash flows (discounted at the loan's original effective interest rate), and its carrying amount. Subjective judgements are made in the calculation of future cash flows. Furthermore, judgements change with time as new information becomes available or as work-out strategies evolve, resulting in frequent revisions to the impairment allowance as individual decisions are taken. Changes in these estimates would result in a change in the allowances and have a direct impact on the impairment charge. The impairment charge reflected in the financial statements in relation to wholesale portfolios is £1,228m (2011: £1,313m; 2010: £2,246m) and amounts to 37% (2011: 35%; 2010: 40%) of the total impairment charge on loans and advances. Further information on impairment allowances and related credit information is set out within the Risk review.

 


2012 

2011 

2010 


£m

£m

£m

New and increased impairment allowances

4,447 

4,962 

6,939 

Releases

(928)

(931)

(1,189)

Recoveries

(212)

(265)

(201)

Impairment charges on loans and advances

3,307 

3,766 

5,549 

(Releases)/charges in respect of provision for undrawn contractually committed facilities and guarantees provided

(4)

24 

76 

Loan impairment

3,303 

3,790 

5,625 

Available for sale assets (excluding BlackRock, Inc.)

40 

60 

51 

Reverse repurchase agreements

(3)

(48)

(4)

Credit impairment charges and other provisions

3,340 

3,802 

5,672 

Impairment of investment in BlackRock, Inc.

-

1,800 

 

More information on the impairment assessment and the measurement of credit losses is included on pages 144-145. The movements on the impairment allowance and the charge for the year is shown on page 113.

 

2012

Loan impairment fell 13% to £3,303m, reflecting lower impairment in UKRBB, Barclaycard and Corporate Banking, partially offset by higher charges in Europe and South Africa.

2011

Loan impairment fell 33% to £3,790m, reflecting generally improving underlying trends across the majority of retail and wholesale businesses. Retail impairment charges reduced 27%, principally relating to Barclaycard, UKRBB and Africa RBB. Wholesale impairment charges reduced 41%, principally reflecting lower charges in Spain and in the Investment Bank, including a release of £223m relating to the loan to Protium which has now been repaid.

 

As at 30 September 2011, an impairment charge of £1,800m was recognised resulting from an assessment that there was objective evidence that the Group's investment in BlackRock, Inc. was impaired.  The impairment reflects the recycling through the income statement of the cumulative reduction in market value previously recognised in the available for sale reserve, since the Group's acquisition of its holding in BlackRock, Inc. as part of the sale of Barclays Global Investors on 1 December 2009. 

 

Further analysis of the Group's impairment charges is presented on pages 112-114.




 

8 Administration and general expenses

 


2012 

2011 

2010 


£m

£m

£m

Property and equipment

1,656 

1,763 

1,813 

Outsourcing and professional services

2,179 

1,869 

1,705 

Operating lease rentals

622 

659 

637 

Marketing, advertising and sponsorship

572 

585 

631 

Communications, subscriptions, publications and stationery

727 

740 

750 

Travel and accommodation

324 

328 

358 

Other administration and general expenses

546 

400 

566 

Impairment of property, equipment and intangible assets (excluding goodwill)

17 

12 

125 

Administration and general expenses

6,643 

6,356 

6,585 

 

 

2012

Administration and general expenses increased £287m to £6,643m, primarily due to the £290m penalty relating to the industry wide investigation into the setting of interbank offered rates.  An increase in expenses relating to the Financial Services Compensation Scheme were offset by a reduction in the underlying cost base reflecting the impact of the Group-wide cost reduction initiative.

 

2011

Administration and general expenses decreased £229m to £6,356m, principally reflecting the benefits of restructuring and the non-recurrence of the one-off provision in respect of the resolution of a review of Barclays compliance with US economic sanctions that occurred in 2010. These reductions have been offset by an increase in outsourcing and professional services as a result of Barclaycard acquisitions and restructuring charges.


 

9 Profit on disposal of subsidiaries, associates and joint ventures

During the year, the profit on disposal of subsidiaries, associates and joint ventures was £28m (2011: loss of £94m), principally relating to the disposal of the Group's 51% stake in Iveco Finance in May 2012.  The Iveco gain on disposal of £21m relates to accumulated foreign exchange gains that were previously recognised directly in equity and were recycled through the income statement within Head Office and Other Operations.

 


 

10 Tax

Accounting for income taxes

Barclays applies IAS 12 Income Taxes in accounting for taxes on income. Income tax payable on taxable profits ('Current Tax') is recognised as an expense in the period in which the profits arise. Withholding taxes are also treated as income taxes. Income tax recoverable on tax allowable losses is recognised as a current tax asset only to the extent that it is regarded as recoverable by offset against taxable profits arising in the current or prior period. Current tax is measured using tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. 

 

Deferred tax is provided in full, using the liability method, on temporary differences arising from the differences between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax is determined using tax rates and legislation enacted or substantively enacted by the balance sheet date which are expected to apply when the deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets and liabilities are only offset when there is both a legal right to set-off and an intention to settle on a net basis.

 

 


2012 

2011 

2010 


£m

£m

£m

Current tax charge




Current year

568 

2,690 

1,413 

Adjustment for prior years

207 

(61)

(20)


775 

2,629 

1,393 

Deferred tax (credit)/charge




Current year

(72)

(657)

102 

Adjustment for prior years

(87)

(70)


(159)

(727)

107 

Tax charge

616 

1,902 

1,500 

 

Tax relating to each component of other comprehensive income can be found in the consolidated statement of comprehensive income, which includes within Other a tax credit of £96m (2011: £74m charge; 2010: £59m credit), principally relating to share based payments.

 

 

 



 

10 Tax continued

The table below shows the reconciliation between the actual tax charge and the tax charge that would result from applying the standard UK corporation tax rate to the Group's profit before tax.

 


2012 

2011 

2010 


£m

£m

£m

Profit before tax from continuing operations

797  

5,770  

5,999  

Tax charge based on the standard UK corporation tax rate of 24.5% (2011: 26.5%, 2010: 28%)

195  

1,529  

1,680  

Effect of non-UK profits or losses at local statutory tax rates different from the UK statutory tax rate

401  

193  

110  

Non-creditable taxes

563  

567  

454  

Non-taxable gains and income

(642)

(494)

(572)

Impact of share price movements on share-based payments

(63)

147  

41  

Deferred tax assets previously not recognised

(135)

(816)

(160)

Change in tax rates

(75)

17  

34  

Non-deductible impairment charges, loss on disposals and UK bank levy

84  

770  

68  

Other items including non-deductible expenses

168  

120  

(140)

Adjustments in respect of prior years

120  

(131)

(15)

Tax charge

616  

1,902  

1,500  

Effective tax rate

77.3%

33.0%

25.0%

 

 

The tax charge for continuing operations for 2012 was £616m (2011: £1,902m) on profit before tax of £797m (2011: £5,770m), representing an effective tax rate of 77.3% (2011: 33.0%).The high effective tax rate in 2012 is a result of the combination of losses in the UK, primarily relating to the own credit charge of £4,579m (2011: gain of £2,708m) with tax relief at 24.5% (2011:26.5%) and profits outside the UK taxed at higher rates represented by £401m (2011: £193m) in the tax rate reconciliation above. The aggregate of the remaining items in the tax rate reconciliation amount to £20m (2011: £180m).

 

Current tax assets and liabilities

 


2012 

2011 


£m

£m

Assets

374  

196  

Liabilities

(1,397)

(646)

As at 1 January 2012

(1,023)

(450)

Income statement

(775)

(2,629)

Equity

(172)

104  

Corporate income tax paid

1,516  

1,686  

Other movements

85  

266  


(369)

(1,023)

Assets

252  

374  

Liabilities

(621)

(1,397)

As at 31 December 2012

(369)

(1,023)

 

Other movements include current tax amounts relating to acquisitions, disposals and exchange.

 

Deferred tax assets and liabilities

The deferred tax amounts on the balance sheet were as follows:

 


2012 

2011 


£m

£m

Barclays Group US Inc. tax group (BGUS)

1,160  

1,094  

US Branch of Barclays Bank PLC (US Branch)

953  

739  

Spanish tax group

611  

704  

UK Group relief group

532  

174  

Other

307  

617  

Deferred tax asset

3,563

3,328

Deferred tax liability

(342)

(566)

Net deferred tax

3,221

2,762

 



 

10 Tax continued

The table below shows the components of deferred tax amounts on the balance sheet. Positive amounts in liabilities relate to deferred tax assets in entities that are in a net liability position on the balance sheet.

 


Fixed asset

timing

differences

Available

for sale

investments

Cash flow

hedges

Retirement

benefit

obligations

Loan

impairment

allowance

Other

provisions

Tax losses

carried

forward

Share

based

payments

Other

Total


£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

Assets

17 

43 

501 

376 

96 

1,346 

329 

855 

3,563 

Liabilities

(84)

(49)

(661)

40 

81 

290 

167 

(135)

(342)

At 31 December 2012

(67)

(6)

(661)

541 

457 

105 

1,636 

496 

720 

3,221 












Assets

97 

160 

405 

391 

161 

1,493 

226 

395 

3,328 

Liabilities

(247)

(39)

(489)

(5)

40 

100 

130 

(56)

(566)

At 31 December 2011

(150)

121 

(489)

400 

431 

261 

1,493 

356 

339 

2,762 

 

US deferred tax assets in BGUS and the US Branch

The deferred tax asset in BGUS and the US Branch includes amounts relating to tax losses of £135m (2011: £329m) and £834m (2011: £603m) respectively, which first arose in 2007. In accordance with US tax rules tax losses can be carried forward and offset against profits for a period of 20 years and therefore any unused tax losses may begin to expire in 2028. The remaining balance primarily relates to temporary differences which are not time limited. The deferred tax asset for the US Branch has been measured using a marginal tax rate being the excess of the US tax rate (a combination of Federal, City and State taxes) over the UK statutory rate.

 

BGUS returned to profitability in 2012, primarily driven by Barclays Capital Inc., its US Broker Dealer, with tax losses expected to be fully utilised in 2013. A 20% reduction in forecasted profit would not extend the recovery period. The assumptions used in the profit forecasts do not include any incremental tax planning strategies.

 

The tax losses in the US Branch are projected to be fully utilised by 2018, based on profit forecasts covering the period from 2013 to 2015, with no profit growth assumed after 2015. A 20% reduction in forecasted profit would extend the recovery period by 2 years to 2020. The assumptions used in the profit forecasts do not include any incremental tax planning strategies.

 

Spain deferred tax asset

The deferred tax asset in Spain includes £322m (2011: £417m) relating to tax losses incurred from 2010 to 2012. In accordance with Spanish tax rules tax losses can be carried forward and offset against profits for a period of 18 years. The remaining balance primarily relates to temporary differences which are not time limited. The asset has reduced to £611m (2011: £704m) reflecting a lower anticipated tax recovery rate.

 

The 2010 to 2012 tax losses are expected to be fully utilised by 2023. Additional losses are anticipated to arise in 2013 partly relating to restructuring costs. The recoverability of the deferred tax asset has been determined using business profit forecasts covering the period from 2013 to 2016, with a subsequent annual growth rate of 2% p.a. A 20% reduction in forecasted profits for 2016 and each subsequent year would extend the recovery period of the tax losses by two years to 2025. A reduction in profits of more than this may result in a partial impairment of the deferred tax asset depending upon the timing of the reversal of deductible temporary differences. The forecast assumptions do not include any incremental tax planning strategies.

 

Other deferred tax assets

The deferred tax asset of £307m (2011: £617m) in other entities includes £55m (2011: £144m) relating to tax losses carried forward. Entities which have suffered a loss in either the current or prior year have a total deferred tax asset of £667m (2011: £363m) relating to tax losses carried forward and temporary differences. Recognition is based on profit forecasts which indicate that it is probable that the entities will have future taxable profits against which the losses and temporary differences can be utilised.

 

The table below shows movements on deferred tax assets and liabilities during the year. The amounts are different from those disclosed on the balance sheet as they are presented before offsetting asset and liability balances where there is a legal right to set-off and an intention to settle on a net basis.

 

10 Tax continued


Fixed asset

timing

differences

Available

for sale

investments

Cash flow

hedges

Retirement

benefit

obligations

Loan

impairment

allowance

Other

provisions

Tax losses

carried

forward

Share

based

payments

Other

Total


£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

Assets

254 

186 

403 

431 

261 

1,493 

356 

1,435 

4,819 

Liabilities

(404)

(65)

(489)

(3)

(1,096)

(2,057)

Effect of the adoption of IFRS 10 on assets

282 

282 

At 1 January 2012 as restated

(150)

121 

(489)

400 

431 

261 

1,493 

356 

621 

3,044 

Income statement

60 

(49)

(30)

(185)

86 

(134)

130 

171 

110 

159 

Equity

(67)

(146)

321 

(12)

(6)

90 

Other movements

23 

(11)

(60)

(22)

13 

(19)

(5)

(72)


(67)

(6)

(661)

541 

457 

105 

1,636 

496 

720 

3,221 

Assets

158 

61 

53 

542 

457 

105 

1,636 

496 

1,551 

5,059 

Liabilities

(225)

(67)

(714)

(1)

(831)

(1,838)

At 31 December 2012

(67)

(6)

(661)

541 

457 

105 

1,636 

496 

720 

3,221 












Assets

134 

76 

753 

345 

162 

1,558 

372 

668 

4,068 

Liabilities

(558)

(43)

(109)

(720)

(1,430)

At 1 January 2011

(424)

33 

(109)

753 

345 

162 

1,558 

372 

(52)

2,638 

Income statement

267 

10 

(154)

91 

110 

(54)

37 

420 

727 

Equity

73 

(393)

(202)

(82)

(601)

Other movements

13 

(5)

(11)

(11)

29 

(32)

(2)


(150)

121 

(489)

400 

431 

261 

1,493 

356 

339 

2,762 

Assets

254 

186 

403 

431 

261 

1,493 

356 

1,435 

4,819 

Liabilities

(404)

(65)

(489)

(3)

(1,096)

(2,057)

At 31 December 2011

(150)

121 

(489)

400 

431 

261 

1,493 

356 

339 

2,762 

 

Other movements include deferred tax amounts relating to acquisitions, disposals and exchange.

 

The amount of deferred tax liability expected to be settled after more than 12 months is £1,337m (2011: £915m). The amount of deferred tax asset expected to be recovered after more than 12 months is £3,537m (2011: £2,368m). These amounts are before offsetting asset and liability balances where there is a legal right to set-off and an intention to settle on a net basis.

 

Unrecognised deferred tax

Deferred tax assets have not been recognised in respect of gross deductible temporary differences of £28m (2011: £1,163m), gross tax losses of £7,295m (2011: £2,299m) which includes capital losses of £3,358m (2011: £2,034m), and unused tax credits of £155m (2011: £nil). Tax losses of £3m (2011: £97m) expire within 5 years, £83m (2011: £101m) expire within 6 to 10 years, £5m (2011: £5m) expire within 11 to 20 years and £7,204m (2011: £2,096m) can be carried forward indefinitely. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profits and gains will be available against which the Group can utilise benefits. 

 

Deferred tax is not recognised in respect of the Group's investments in subsidiaries and branches where remittance is not contemplated and for those associates and interests in joint ventures where it has been determined that no additional tax will arise. The aggregate amount of temporary differences for which deferred tax liabilities have not been recognised is £836m (2011: £703m).

 

Critical accounting estimates and judgements

The Group is subject to income taxes in numerous jurisdictions and the calculation of the Group's tax charge and worldwide provisions for income taxes necessarily involves a degree of estimation and judgement. There are many transactions and calculations for which the ultimate tax treatment is uncertain and cannot be determined until resolution has been reached with the relevant tax authority. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due after taking into account external advice where appropriate. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made. These risks are managed in accordance with the Group's Tax Risk Framework.

 

Deferred tax assets have been recognised based on business profit forecasts. Further detail on the recognition of deferred tax assets are provided on page 28 in the deferred tax assets and liabilities section of this tax note.

 


11 Earnings per share

 


2012 

2011 

2010 


£m

£m

£m

(Loss)/profit attributable to equity holders of parent from continuing operations

(624)

2,924 

3,514 

Dilutive impact of convertible options

(10)

(Loss)/profit attributable to equity holders of parent from continuing operations including dilutive impact of convertible options

(624)

2,924 

3,504 

 

  

2012 

2011 

2010 

  

million

million

million

Basic weighted average number of shares in issuea

 12,225 

 11,988 

 11,719 

Number of potential ordinary shares

 389 

 538 

 733 

Diluted weighted average number of shares

 12,614