BARCLAYS PLC, Annual Report 2006 Significant Accounting Policies

5.1 BARCLAYS PLC, Annual Report 2006 Significant Accounting Policies

11. Collateral and netting The Group enters into master agreements with counterparties whenever possible and, when appro-

priate, obtains collateral. Master agreements provide that, if an event of default occurs, all outstanding transactions with the counterparty will fall due and all amounts outstanding will be settled on a net basis.

Netting Financial assets and liabilities are offset and the net amount reported in the balance sheet if, and

only if, there is a legally enforceable right to set off the recongnised amounts and there is an intention to settle on a net basis, or to realise an asset and settle the liability simultaneously. In many cases, even though master netting agreements are in place, the lack of an intention to settle on a net basis results in the related assets and liabilities being presented gross in the balance sheet.

17. Issued debt and equity securities

Issued financial instruments or their components are classified as liabilities where the contractual ar- rangement results in the Group having a present obligation to either deliver cash or another financial as- set to the holder, to exchange financial instruments on terms that are potentially unfavourable or to sat- isfy the obligation otherwise than by the exchange of a fixed amount of cash or another financial asset for a fixed number of equity shares. Issued financial instruments, or their components, are classified as equity where they meet the definition of equity and confer on the holder a residual interest in the assets of the Company. The components of issued financial instruments that contain both liability and equity elements are accounted for separately with the equity component being assigned the residual amount af- ter deducting from the instrument as a whole the amount separately determined as the fair value of the li- ability component.

Financial liabilities, other than trading liabilities and financial liabilities designated at fair value, are carried at amortised cost using the effective interest method as set out in policy 6. Derivatives embedded in financial liabilities that are not designated at fair value are accounted for as set out in policy 12. Eq- uity instruments, including share capital, are initially recognised at net proceeds, after deducting transac- tion costs and any related income tax. Dividend and other payments to equity holders are deducted from equity, net of any related tax.

18. Share capital

Share issue costs Incremental costs directly attributable to the issue of new shares or options including those issued on

the acquisition of a business are shown in equity as a deduction, net of tax, from the proceeds. Dividends on ordinary shares

Dividends on ordinary shares are recognised in equity in the period in which they are paid or, if ear- lier, approved by the Barclays PLC (the Company) shareholders.

Treasury shares Where the Company or any member of the Group purchases the Company’s share capital, the con-

sideration paid is deducted from shareholders’ equity as treasury shares until they are cancelled. Where such shares are subsequently sold or reissued, any consideration received is included in shareholders’ equity.

Chapter 24 / Financial Instruments: Presentation (IAS 32)

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