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Notes to the accounts
61 Differences between UK GAAP and US GAAP
accounting principles

The accounts presented in this report have been prepared in accordance with accounting principles generally accepted in the UK (UK GAAP). Such principles vary in significant respects from those generally accepted in the United States (US GAAP). Preparing the financial statements requires the use of management’s estimates. The significant differences applicable to the Group’s accounts are summarised below.
UK GAAP US GAAP
Goodwill
Goodwill arising on acquisitions of subsidiary and associated undertakings and joint ventures is capitalised and amortised through income over its expected life (with a maximum of 20 years). Capitalised goodwill is written off when judged to be irrecoverable. There is therefore no UK/US GAAP difference for goodwill arising since the introduction of FRS 10 during 1998 except to the extent the value of goodwill calculated under the two regimes differs. However, in the event of a subsequent disposal, any goodwill previously charged directly against reserves under Statement of Standard Accounting Practice (SSAP 22) will be written back and reflected in the profit or loss on disposal. Goodwill is capitalised and amortised through income over the period estimated to benefit. In Barclays case, a period of 20 years has been used. Goodwill is periodically evaluated for impairment and written off when judged to be irrecoverable.

US GAAP can require the recognition of certain assets and liabilities that would either not be recognised or have a different measurement value under UK GAAP.
Core deposit intangibles
Under UK GAAP the value of depositor relationships is not considered to be a separately identifiable asset. In relation to the acquisition of a deposit taking institution, a separate intangible asset covering depositor relationships is recognised. To the extent that such an asset is recognised there is a commensurate reduction in the amount of recorded goodwill. The value ascribed is amortised to net income over the average life of the depositor relationships in question.
Pension cost
In respect of defined benefit schemes, pension fund assets are assessed actuarially at the present value of the expected future investment income, which is consistent with SSAP 24. Most liabilities are discounted at a long-term interest cost and variations from regular cost are spread over the average remaining service lives of current employees.


For defined contribution schemes the net pension cost for a period is the contribution called for in that period in accordance with SSAP 24. 		In respect of defined benefit schemes, the same basic actuarial method is used under Statement of Financial Accounting Standards (SFAS) No. 87 as under UK GAAP, but certain assumptions differ, assets are assessed at fair value and liabilities are assessed at current settlement rates. Certain variations from regular cost are allocated in equal amounts over the average remaining services lives of current employees.

For defined contribution schemes SFAS No. 87 provides for the same treatment as under UK GAAP.
Post-retirement benefits
Post-retirement health care liabilities are assessed actuarially on a similar basis to pension liabilities under SSAP 24 and are discounted at a long-term rate. Variations from regular cost are expressed as a percentage of payroll and spread over the average remaining service lives of current eligible employees. Under SFAS No. 106, there are certain differences in the actuarial method used and variations in the computation of regular cost as compared with UK GAAP.
Leasing – lessor
Finance lease income is recognised in proportion to the funds invested in the lease using a method which results in a level rate of return on the net cash investment. Application of SFAS No. 13 gives rise to a level rate of return on the investment in the lease, but without taking into account tax payments and receipts. This results in income being recognised in different periods than under UK GAAP.
Leasing – lessee
In accordance with FRS 5 and SSAP 21, leases are categorised as finance leases when the substance of the agreement is that of a financing transaction and the lessee assumes substantially all of the risks and benefits relating to the asset. All other leases are categorised as operating leases. Leases are classified as capital leases when any of certain criteria are met as outlined under SFAS No. 13. All other leases are classified as operating leases.
Deferred tax
Deferred tax is provided using the liability method on timing differences where it is considered probable that a liability to tax will crystallise.

No deferred tax asset is created in respect of the general provision for bad and doubtful debts which is not deductible in arriving at UK taxable profits. 		Under SFAS No. 109, a liability method is also used, but deferred tax assets and liabilities are calculated for all temporary differences, including the general provision for bad and doubtful debts. A valuation allowance is raised against a deferred tax asset where it is more likely than not that some portion of the deferred tax asset will not be realised.
Property depreciation
Depreciation is charged on the cost or revalued amounts of freehold and long leasehold properties over their estimated useful economic lives. Freehold and long-leasehold property is depreciated based on the historical cost.
Revaluation of property
Property is carried either at original cost or at subsequent valuation less related depreciation (as described in Accounting policies), calculated on the revalued amount where applicable. Revaluation surpluses are taken directly to shareholders’ funds, while deficits below cost, less any related depreciation, are included in attributable profit.

With effect from 1st January 2000 the Group has applied the transitional rules available under FRS15. The revalued book amounts will be retained without subsequent revaluation subject to the requirement to test for impairment. 		Revaluations of property are not permitted in the accounts under US GAAP. As a result, when a revalued property is disposed of, a greater profit or lower loss is generally recorded under US GAAP than under UK GAAP.
Shareholders’ interest in the long-term assurance fund
The shareholders’ interest in the in-force life assurance and pensions policies of the long-term assurance fund is valued at the net present value of the profits inherent in such policies. The net present value of the profits inherent in the in-force life and pensions policies of the long-term assurance fund is not recognised by the Group under US GAAP. An adjustment is made for the amortisation of acquisition costs and fees in accordance with SFAS No. 97.
Disposal of investments
Exchange rate translation differences, which arise in respect of foreign currency denominated investments, are included in the carrying value of the investment and are also accumulated in the reserves in the consolidated accounts. The profit or loss on any disposal is calculated by comparing the net proceeds with the then carrying value of the investment. SFAS No. 52 requires similar treatment of exchange rate translation differences, except that, on disposal, cumulative exchange rate translation differences, which have previously been taken to reserves, are reversed and reported as part of the profit or loss on sale of the investment.
Share compensation schemes
Where shares are purchased, the difference between the purchase price and any contribution made by the employee is charged to the profit and loss account in the period to which it relates. Where shares are issued, or options granted, the charge made to the profit and loss account is the difference between the fair value at the time the award is made and any contribution made by the employee. SFAS No. 123 encourages the adoption of accounting for share compensation schemes, based on their estimated fair values at the date of the grant. Accordingly, the Group charges this fair value to the profit and loss account over the period to their vesting dates.
Net unrealised gain/loss on investment securities
Investment debt securities and equity shares are stated at amortised cost less provision for diminution in value. Investment securities are those intended for use on a continuing basis by the Group. SFAS No. 115 requires that certain securities which are intended for use on a continuing basis be recorded at fair value with unrealised gains and losses recorded in shareholders’ equity. The securities so treated are debt securities which are ‘available for sale’ – the absence of intent and ability to hold them to maturity – and certain marketable equity securities.
Mortgage incentives
Incentives in the form of cashbacks and discounts are written off as incurred as permitted by the SORP on Advances. SFAS 91 requires incremental direct costs of loan origination to be deferred and amortised over the life of the loan as an adjustment to interest income.
Provision for credit losses
The Group establishes, through charges or credits against profit, sufficient specific provision to cover the estimated loss as soon as the recovery of a lending is identified as doubtful. General provisions are raised to cover losses which are judged to be present in the loan portfolio, but have not been specifically identified as such. This provision is adjusted by an appropriate charge or release. SFAS No. 114 requires the overall credit risk provision of impaired loans to be determined based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, or, as a practical expedient, on the loan’s observable market value, or the fair value of collateral if the loan is collateral dependent. A corresponding charge or credit for bad debt provisions should accompany any adjustment in the credit risk provision. Smaller balance homogeneous consumer loans that are collectively evaluated for impairment are outside the scope of SFAS No. 114, as are debt securities and leases.
Dividend payable
Dividends declared after the period end are recorded in the period to which they relate. Dividends are recorded in the period in which they are declared.
Taxation
Profit before tax and the tax charge for the year includes tax at the effective rate on the shareholders’ interest in the long-term fund. Income before tax and the tax charge do not include such adjustments for tax.
Acceptances
Acceptances are not recorded within the balance sheet. Acceptances and the related customer liabilities are recorded within the balance sheet.
Transfer and servicing of financial assets
Under FRS 5 where a transaction involving a previously recognised asset transfers to others (a) all significant rights or other access to benefits relating to that asset and (b) all significant exposure to the risks inherent in those benefits, the entire asset should cease to be recognised. Under SFAS No. 125 control passes where the following criteria are met: (a) the assets are isolated from the transferor (the seller) i.e. they are beyond the reach of the transferor, even in bankruptcy or other receivership, (b) the transferee (the buyer) has the right – free of any conditions that constrain it from taking advantage of the right – to pledge or exchange the assets, and (c) the transferor does not maintain effective control over the transferred assets.
Extinguishment of liabilities
Under FRS 5, a liability is extinguished if an entity’s obligation to transfer economic benefits is satisfied or removed. Satisfaction would encompass an ‘in-substance’ defeasance transaction where liabilities are satisfied from the cash flows arising from essentially risk free assets transferred by the debtor to an irrecoverable defeasance trust. Under SFAS No. 125 a debtor may de-recognise a liability if and only if either (a) the debtor pays the creditor and is relieved of its obligation for the liability, or (b) the debtor is legally released from being the primary obligor under the liability either financially or by the creditor. SFAS No.125 does not allow for the de-recognition of a liability by means of an ‘in-substance’ defeasance transaction.
Offset
Under FRS 5 items should be aggregated into a single item where there is a right to insist on net settlement and the debit balance matures no later than credit balance. Under FIN 41, repurchase and reverse repurchase agreements may only be netted where they have the same explicit settlement date specified at the inception of the agreement.
Restructuring of business provisions
In accordance with FRS 3 and FRS 12, provisions have been made for any direct costs and net future operating losses arising from a business that management is committed to restructure, sell or terminate, has a detailed formal plan for exit, and has raised a valid expectation of carrying out the restructuring plan. The application of Emerging Issues Task Force (EITF) 94-3 has created recognition timing differences in respect of certain of the termination provisions. EITF 94-3 sets out specific conditions which must be met to enable liabilities relating to restructuring, sale or involuntary terminations to be recognised in the period management approve the termination plan. In respect of costs other than employee termination benefits, the basic requirements for recognition at the date of commitment to the plan to terminate are that they are not associated with, or do not benefit, activities that will be continued.
Computer software developed or obtained for internal use
All computer software costs are expensed in the year of purchase unless the cost of the computer program cannot be separated from the hardware cost. AICPA SOP 98-1 requires certain costs incurred in respect of software for internal use to be capitalised and subsequently amortised. The SOP was applied prospectively.
Internal hedging
The hedging of derivatives undertaken with an independently managed trading unit of the Group may be accrual accounted by the hedging entity. US GAAP requires a direct linkage between the internal transaction and a transaction with the external market by the trading unit in order for hedge accounting to be used. If this does not exist, then the internal derivative must be fair valued by the hedging entity.
Special purpose vehicles
Entities should be consolidated when they are under the control of the reporting entity. Consolidation of an entity by its sponsor, the party at whose initiative the entity is activated, is required if the entity’s activities are not strictly limited and less than 3% of its equity is held by parties other than the sponsor.
Developments in US GAAP
Implementation of SFAS 133
From 1st January 2001 the Group will adopt the requirements of Statement of Financial Accounting Standard 133 (SFAS 133), ‘Accounting for Derivative Instruments and Hedging Activities’ as amended by SFAS 138. SFAS 133 sets out strict requirements in relation to the management and measurement of hedging relationships and where these are not met the derivatives must be treated as trading transactions and marked to market. It requires an entity to recognise all derivatives as either assets or liabilities measured at fair value. The accounting for changes in the fair value of a derivative depends on the use of the derivative. The Group does not intend to make changes to its hedging policies and procedures specifically to comply with the requirements of SFAS 133 and therefore from 1st January 2001, for US GAAP purposes, many hedging derivatives will be treated as trading items and marked to market. For UK GAAP reporting the Group will continue to hold a significant portfolio of derivative transactions designed to eliminate or significantly reduce the risk in relation to assets, liabilities or cash flows and these will be hedge accounted in accordance with UK GAAP.

SFAS 133 contains transitional rules with specific requirements dependent upon the nature of the hedge deemed to exist before the adoption of SFAS 133. The Group has a significant portfolio of derivatives to hedge the fair value of fixed rate balances and in accordance with the transitional rules the fair value of the derivatives and the related underlying positions will be taken to income as of 1st January 2001. The net adjustment arising from this will not be material. The Group also has derivatives designed to hedge future cash flows and under the transitional rules the impact on the fair value of £344m at 31st December 2000 will be credited to Other Comprehensive income and amortised to net income in accordance with the underlying cash flows.

The implementing of SFAS 133 will mean that the Group’s earnings under US GAAP may be subject to increased volatility. The adoption of SFAS 133 will also impact assets and liabilities recorded on the balance sheet.

Implementation of SFAS 140
As of 31st December 2000 the Group adopted the transitional provisions of SFAS 140 ‘Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities’. Under SFAS 140, the Group is required to reclassify the market value of collateral pledged to counterparties under stock lending agreements and securities sold under agreements to repurchase, in which the counterparty has the right to sell or repledge the security, from Securities owned to Securities owned pledged to counterparties. SFAS 140 also requires the disclosure of the market value of collateral received under stock borrowing agreements and securities purchased under agreements to resell which it has the ability to sell or repledge. Securities purchased under such agreements to resell are no longer recognised as assets and prior periods have been restated accordingly.
Note 2000
£m		 1999
£m		 1998
£m
Attributable profit of Barclays PLC Group
(UK GAAP)		 2,473 1,759 1,317
Goodwill (a) (12) 123 (78)
Core deposit intangible (b) (12) – –
Pension cost (c) (193) (176) 154
Post-retirement benefits (c) (15) (4) (5)
Leasing – lessor (d) (14) (16) 84
Leasing – lessee (e) 3 (2) 3
Onerous leases (f) – (100) 23
Deferred tax (g) (162) 130 35
Property depreciation 3 4 4
Share compensation schemes (h) (44) (30) (19)
Shareholders’ interest in the long-term
assurance fund		 (77) (50) (55)
Property revaluation differences 1 21 18
Disposal of investments (12) (43) (9)
Restructuring of business provisions (n) 15 (19) (17)
Internal use software (p) 123 95 –
Internal hedging (q) 148 (94) –
Mortgage incentives (r) 17 – –
Fair value amortisation charge (a) 1 – –
Non-qualifying special purpose vehicles (s) (72) – –
Tax effect on the above UK/US GAAP
reconciling items		 24 97 (85)
Approximate net income (US GAAP) 2,195 1,695 1,370
Barclays PLC Group p p p
Basic earnings per £1 ordinary share (i) 145.0 113.2 90.8
Diluted earnings per £1 ordinary share (i) 143.6 111.3 89.4
Note 2000
£m		 1998
£m
Equity shareholders’ funds (UK GAAP) 13,187 8,483
Goodwill (a) 66 78
Core deposit intangible (b) (12) –
Pension cost (c) (259) (66)
Post-retirement benefits (c) (15) –
Leasing – lessor (d) (168) (154)
Leasing – lessee (e) 13 10
Deferred tax (g) – 162
Property depreciation (41) (44)
Share compensation schemes (h) (110) (66)
Shareholders’ interest in the long-term
assurance fund		 (751) (674)
Revaluation of property (k) (273) (278)
Net unrealised gain on investment securities (j) 322 68
Dividend payable 632 484
Own shares (v) (5) (5)
Restructuring of business provisions (n) 15 –
Internal use software (p) 218 95
Internal hedging (q) 54 (94)
Mortgage incentives (r) 17 –
Fair value amortisation charge (a) 1 –
Non-qualifying special purpose vehicles (s) (72) –
Tax effect on the above UK/US GAAP
reconciling items		 210 263
Approximate shareholders’ equity (US GAAP) 13,029 8,262
Selected financial data, adjusted from UK GAAP to reflect the main differences from US GAAP,is given in the US GAAP financial data section.
SFAS 130 – Comprehensive income
The following tables detail the approximate comprehensive income and accumulated other comprehensive income under US GAAP.
2000
£m		 1999
£m		 1998
£m
Barclays PLC – Approximate net income
(US GAAP)		 2,195 1,695 1,370
Net exchange translation differences* (14) (26) 40
Net unrealised gains on investment securities** 177 (111) 7
Barclays PLC – Approximate comprehensive income (US GAAP) 2,358 1,558 1,417
Net exchange translation differences (336) (322) (296)
Net unrealised gains on investment securities** 225 48 159
Accumulated other comprehensive income (111) (274) (137)
* Including reclassification to net income on disposal of investments.
** Net of tax effect of £77m (1999 £(51m), 1998 £2m).

a) Goodwill
In relation to the acquisition of The Woolwich, US GAAP requires the recognition of certain assets that may not be recognised under UK GAAP, namely mortgage incentives and software developed for internal use. Additionally the calculated fair value of the pension fund and liabilities under share option schemes differed under the respective requirements. These fair value adjustments are amortised over the expected life of the relevant asset/liability and resulted in an additional charge of £1m under US GAAP. The net effect of the separate classification of core deposit intangibles and the different fair value adjustments under US GAAP is to decrease the goodwill amortisation charge under US GAAP by £4m.

The credit adjustment in 1999 arises from the difference between the UK GAAP charge to profit and loss on provisions for disposals and that under US GAAP. In 1998 the charge included an amount of £83m charged following a review undertaken of purchased goodwill which had been written off against reserves under UK GAAP.
b) Core deposit intangible 2000
£m		 1999
£m
Recognised on acquisition of The Woolwich 450 –
Amortisation charged to profit and loss (12) –
Balance carried forward 438 –
The value inherent in the deposit relationship held by The Woolwich at the time of acquisition has been calculated to be £450m and this is held as a separate intangible asset with a consequent decrease in goodwill as compared to UK GAAP. The core deposit intangibles is being amortised over seven years being the estimated average life of the depositor relationships in question.

c) Pension cost and post-retirement benefits
The measurement of US GAAP pension expense and post-retirement benefits charge is undertaken in accordance with the requirements of SFAS No. 87 ‘Employers’ Accounting for Pensions’, and SFAS No. 106 ‘Employers’ Accounting for Post-retirement Benefits other than Pensions’ respectively. The disclosures below reflect the amendments to the requirements of the two statements arising from SFAS No. 132 ‘Employers’ Disclosures about Pensions and Other Post-retirement Benefits’.

In accordance with SFAS No. 87 the excess of pension plan assets over the projected benefit obligation, as at the transition date, is recognised as a reduction of pension expense on a prospective basis over approximately 15 years.

The provisions of US GAAP have only been applied to the main UK pension scheme, the UK Retirement Fund (previously known as the Barclays Bank (1964) Pension Fund) and The Woolwich Pension Fund. The following analysis relates to the UK Retirement Fund (1964 Pension Scheme and retirement investment scheme) and The Woolwich pension fund which makes up approximately 90% of all the Group’s schemes in terms of assets and actuarial liabilities. The impact on income of applying US GAAP on the other Group schemes is considered to be immaterial.
The components of the pension and post-retirements expense which arise under US GAAP are estimated to be as follows:
2000 1999 1998
Pensions Post-
retirement
benefits		 Pensions Post-
retirement
benefits		 Pensions Post-
retirement
benefits
£m £m £m £m £m £m
Components of net periodic benefit cost
Service cost 352 1 302 2 235 4
Interest cost 591 9 506 10 465 12
Amortisation of prior service cost (23) 2 (25) 2 (25) 6
Recognised net actuarial gain/(deficit) – 4 – 5 (137) –
Net periodic benefit/(cost) 132 16 176 19 (154) 22
For measurement purposes, the calculation assumes a 10% and 6.5% annual rate of increase in the per capita cost of covered medical benefits and dental benefits respectively for pensioners in schemes in the US. These rates are further assumed to reduce steadily each year to 6% in 2004 and 2001 respectively and remain at that level thereafter.

For pensioners in schemes in the UK a 3% annual rate of increase in the per capita cost of covered medical benefits was assumed, reflecting the agreement to cap average increases at this level.

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one percentage point change in assumed health care trend rates would have the following effects for 2000.
1% increase
£m		 1% decrease
£m
Effect on total of service and interest cost components 1 (1)
Effect on post-retirement benefit obligation 18 (17)
The following table presents the estimated funded status of the Pension scheme and post-retirement benefits (the latter are unfunded) under US GAAP:
2000 1999 1998
Pensions Post-
retirement
benefits		 Pensions Post-
retirement
benefits		 Pensions Post-
retirement
benefits
£m £m £m £m £m £m
Change in benefit obligation
Benefit obligation at beginning of year 10,872 176 10,277 243 7,311 184
Adjustment for RIS 74 – – – – –
Expected return on plan assets (788) – (607) – (692) –
Plan amendment – reduction in obligation – – – (58) – –
Service cost 352 1 302 2 235 4
Interest cost 591 9 506 10 465 12
Plan participants’ contributions 4 – – – – –
Actuarial loss/(gain) 1,846 9 122 (10) 2,578 52
Benefits paid (378) (11) (335) (11) (312) (9)
Benefit obligation at end of year 13,361 184 10,872 176 10,277 243
Change in plan assets
Fair value of plan assets at beginning of year 11,337 – 9,493 – 10,026 –
Adjustment for RIS 74 – – – – –
Actual return on plan assets 1,414 – 2,162 – (192) –
Employer contribution/transfers 1,001 – 17 – (29) –
Plan participants’ contributions 4 – – – –
Benefits paid (378) – (335) – (312) –
Fair value of plan assets at end of year 13,452 – 11,337 – 9,493 –
Funded status 91 (184) 465 (176) (784) (243)
Unrecognised transition amount (57) 19 (90) 19 (115) 80
Unrecognised net actuarial (gain)/loss (371) 57 (440) 56 1,010 71
(Accrued)/prepaid benefit cost (337) (108) (65) (101) 111 (92)
Employer contribution/transfers includes the assets from The Woolwich pension scheme and the transfer in of assets to the UK Retirement Fund from the defined benefit element of the Barclays Capital scheme during 2000. The actuarial loss/(gain) reflects the obligations relating to The Woolwich and Barclays Capital schemes.

Pension plan assets are invested primarily in equities, fixed interest securities
and property.

Further details of the post-retirement health care expense under UK GAAP are given in note 5 to the accounts.

In accordance with US GAAP requirements the actuaries for the pensions plan used the following assumptions on a weighted average basis; discount rate of 5.0% (1999 5.25%, 1998 5.0%), rate of compensation increase of 4.5% (1999 4.5%, 1998 4.0%), and expected long-term rate of return on plan assets of 6.5% (1999 6.75%, 1998 6.5%).

In accordance with the US GAAP requirements the accounting for the post-retirement benefits charge assumed a discount rate of 5.0% (1999 5.5%, 1998 5.0%) for UK benefits and 7.5% (1999 7.25%, 1998 6.75 %) for US benefits, on a weighted average basis.
d) Leasing – lessor
The leasing adjustment is dependent upon the value and average age of the leasing portfolio at each period end.
e) Leasing – lessee
Under US GAAP, provisions are made for losses arising on subleases of certain operating leases which are treated as finance leases under UK GAAP.
f) Onerous leases
The charge in the year to 31st December 1999 arose as a result of a review of leasehold properties and related to those where unavoidable costs exceeded anticipated income. The credit in the year to 31st December 1998 related to the reversal of the prior year adjustment recorded under UK GAAP on the implementation in 1999 of Financial Reporting Standard 12.
g) Deferred tax
In accordance with SFAS No. 109 ‘Accounting for Income Taxes’, the components of the net US GAAP deferred tax liability are as follows:
2000
£m		 1999
£m
Deferred tax liabilities:
Leasing transactions (943) (960)
Capital allowances (9) (31)
Other (114) (14)
Total deferred tax liabilities (1,066) (1,005)
Deferred tax assets:
Specific allowances 36 30
General allowance 209 192
Tax losses 162 337
Other 184 158
Total deferred tax assets before valuation allowance 591 717
Less: valuation allowance (156) (146)
Deferred tax assets less valuation allowance 435 571
Net deferred tax liability under US GAAP (631) (434)
(i) The main components of the tax charge attributable to continuing operations are shown in note 11 to the accounts.

(ii) A reconciliation of tax payable at the UK standard corporation tax rate and Barclays effective tax rate is shown under Tax in the Financial review.

(iii)The valuation allowance relates to the Group’s capital losses and unrelieved overseas tax losses. These assets will be recognised in the future when it becomes likely that they will be utilised.
h) Share compensation schemes
With effect from 1st January 1996, the Group adopted SFAS No. 123 ‘Accounting for Stock-Based Compensation’.

SFAS No.123 encourages the adoption of accounting for share compensation schemes based on their estimated fair value at the date of grant. The requirements are only applicable to options and other awards granted from 1st January 1995 onwards and, in the initial phase-in period, the amounts reported will not be representative of the effect on reported net income for future years. The SFAS No. 123 charge for the fair value of options granted since 1995 is £44m (1999 £30m, 1998 £19m).

The ESOS, SAYE, ISOP, the BGI Equity Ownership Plan, The Woolwich ESOP and The Woolwich SAYE scheme fall within the scope of SFAS No.123.

Analysis of the movement in the number and weighted average exercise price of options are set out below:
Executive Share Option Scheme (1) SAYE Share Option Scheme (1)
Number
(000’s)		 Weighted av.
ex. price (£)		 Number
(000’s)		 Weighted av.
ex. price (£)
2000 1999 2000 1999 2000 1999 2000 1999
Outstanding at beginning of year 3,784 3,119 15.12 12.82 36,204 31,393 10.75 9.67
Granted in the year 176 1,209 14.44 17.82 6,817 8,047 12.64 14.26
Exercised in the year (242) (507) 8.24 7.57 (7,023) (1,950) 7.79 8.02
Less: Forfeited in the year (130) (37) 14.92 12.55 (2,883) (1,286) 11.93 10.48
Outstanding at end of year 3,588 3,784 15.56 15.12 33,115 36,204 11.66 10.75
Incentive Share Option Plan (1) BGI Equity ownership plan (2)
Number
(000’s)		 Weighted av.
ex. price (£)		 Number
(000’s)		 Weighted av.
ex. price (£)
2000 1999 2000 1999 2000 1999 2000 1999
Outstanding at beginning of year – – – – – – – –
Granted in the year 3,769 – 15.63 – 5,585 – 6.11 –
Exercised in the year – – – – – – – –
Less: Forfeited in the year (13) – 15.63 – (50) – 6.11 –
Outstanding at end of year 3,756 – 15.63 – 5,535 – 6.11 –
The Woolwich ESOP rollover (1) The Woolwich SAYE rollover (1)
Number
(000’s)		 Weighted av.
ex. price (£)		 Number
(000’s)		 Weighted av.
ex. price (£)
2000 1999 2000 1999 2000 1999 2000 1999
Outstanding at beginning of year – – – – – – – –
Granted in the year 3,088 – 15.20 – 1,566 – 12.64 –
Exercised in the year (82) – 14.62 – – – – –
Less: Forfeited in the year – – – – – – – –
Outstanding at end of year 3,006 – 15.20 – 1,566 – 12.64 –
The Woolwich ESOP (3) The Woolwich SAYE scheme (3)
Number
(000’s)		 Weighted av.
ex. price (£)		 Number
(000’s)		 Weighted av.
ex. price (£)
2000 1999 2000 1999 2000 1999 2000 1999
Outstanding upon acquisition 19,528 – 3.28 – 8,881 – 2.76 –
Rolled over into Barclays options – or cancelled for cash (14,570) – 3.30 – (7,741) – 2.75 –
Exercised in the period – 25.10.00 – 31.12.00 (3,658) – 3.23 – (218) – 2.73 –
Less: Forfeited in the period – 25.10.00 – 31.12.00 – – – – (249) – 2.77 –
Outstanding at end of year 1,300 – 3.27 – 673 – 2.93 –
(1) Options granted over Barclays PLC shares
(2) Options granted over BGI UK Holdings Limited shares
(3) Options granted over Woolwich plc shares
The disclosures of options outstanding only relate to those granted from 1995 onwards.

The range of exercise prices, weighted average fair values at the date of grant and the weighted average remaining contractual life for options outstanding at the balance sheet date are as follows:
2000 1999
Exercise
price range
£		 Weighted
average
exercise
price
£		 Weighted
average
fair value
£		 Weighted
average
remaining
life
Years		 Exercise
price range
£		 Weighted
average
exercise
price
£		 Weighted
average
fair value
£		 Weighted
average
remaining
life
Years
Executive Share Option Scheme (1) 7.04-17.82 15.56 4.78 7 7.04-17.82 15.12 4.53 5
SAYE Share Option Scheme (1) 6.28-14.26 11.66 5.31 3 6.28-14.26 10.75 4.46 3
Incentive Share Option Plan (1) 15.63-16.88 15.63 7.13 9 – – – –
BGI Equity Ownership Plan (2) 6.11 6.11 2.20 9 – – – –
The Woolwich SAYE scheme (1) 12.34-13.49 12.64 9.35 2 – – – –
The Woolwich ESOP (1) 13.17-16.90 15.20 10.66 9 – – – –
The Woolwich SAYE scheme (3) 2.68-3.13 2.93 1.59 0 – – – –
The Woolwich ESOP (3) 2.86-3.67 3.27 1.84 0 – – – –
Fair values for the ISOP, ESOS, SAYE, The Woolwich ESOP and The Woolwich SAYE are calculated at the date of grant using a binomial model which produces similar results to the Black-Scholes model. The significant weighted average assumptions used to estimate the fair value of the options granted in 2000 are as follows:
ISOP ESOS SAYE Woolwich
ESOP (1)
rollover		 Woolwich
ESOP (3)		 Woolwich
Sharesave (1)
rollover		 Woolwich
Sharesave (3)
Risk-free interest rate 6.18% 6.33% 6.23% 5.92% 5.92% 5.92% 5.92%
Expected life (years) 10 10 5 9 0 2 0
Expected volatility 35% 45% 35% 45% 45% 45% 45%
The fair values for the BGI EOP are calculated using a formula based on an earnings multiple.
The range, weighted average exercise price, weighted average remaining contractual life and number of options outstanding, including those exercisable at year end (see Exercise Price Range table below), are as follows:
Executive Price Range Weighted
average
exercise price
£m		 Weighted
average
remaining life
Years		 Number of
options
outstanding
Executive Share Option Scheme
£6.00 – £9.99 8.19 4 212,500
£10.00 – £13.99 13.88 5 780,000
£14.00 – £17.99 15.69 7 2,595,644
SAYE Share Option Scheme (1)
£6.00 – £9.99 7.62 1 8,327,669
£10.00 – £13.99 12.54 3 17,877,119
£14.00 – £17.99 14.26 3 6,909,853
BGI Equity Ownership Plan (2)
£6.00 – £9.99 6.11 9 5,585,000
Incentive Share Option Plan (1)
£14.00 – £17.99 15.63 9 3,756,000
The Woolwich ESOP (1)
£10.00 – £13.99 13.17 9 553,238
£14.00 – £17.99 15.66 9 2,452,809
The Woolwich SAYE scheme (1)
£10.00 – £13.99 12.64 2 1,565,662
The Woolwich ESOP (3)
£0.00 – £5.99 3.27 0 1,300,153
The Woolwich SAYE scheme (3)
£0.00 – £5.99 2.93 0 673,417
(1) Options granted over Barclays PLC shares
(2) Options granted over BGI UK Holdings Limited shares
(3) Options granted over Woolwich plc shares
Deferred tax liabilities:
Exercise Price Range Weighted average
exercise price
£m		 Number of
options
Executive Share Option Scheme
£6.00 – £9.99 8.19 212,500
£10.00 – £13.99 13.88 780,000
SAYE Share Option Scheme
£6.00 – £9.99 6.28 185,238
£10.00 – £13.99 12.67 37,597
The Woolwich ESOP
£0.00 – £5.99 3.27 1,300,153
The Woolwich SAYE
£0.00 – £5.99 2.93 673,417
The expected dividends for all schemes are assumed to grow in line with the expected increases in share prices for the industry sector until exercise.

The ESOS is a long-term incentive scheme and is currently available by invitation to certain senior executives of the Group with grants usually made annually. Options are issued at the market price at the date of the grant without any discount, calculated in accordance with the rules of the Scheme, and are normally exercisable between three and ten years from that date. No further awards will be made under ESOS.

Eligible employees in the UK may participate in the SAYE. Under this Scheme, employees may enter into contracts to save up to £250 per month and, at the expiry of a fixed term of three, five or seven years, have the option to use these savings to acquire shares in the Company at a discount, calculated in accordance with the rules of the scheme. The discount is currently 20% of the market price at the date the options were granted.

The ISOP has been introduced to replace the ESOS. It is open by invitation to the employees and Directors of Barclays PLC options are granted at the market price at the date of grant calculated in accordance with the rules of the Plan, and are normally exercisable between three and ten years from that date. The final number of shares over which the option may be exercised will be determined by reference to set performance criteria. The number of shares under option represents the maximum possible number that may be exercised.

The BGI Equity Ownership Plan is extended to senior employees of BGI. The exercise price of the options are determined by formula at the date of grant and is not less than the market value of the share at the time of grant. The options are granted over shares in BGI Holdings UK Ltd, a subsidiary of Barclays Bank PLC. Options are normally not exercisable until vesting, with a third of the options held becoming exercisable at each anniversary of grant. Options lapse ten years after grant. At 31st December, 5.5m (1999 nil) options were outstanding under the terms of the BGI Equity Ownership Plan enabling certain members of staff to subscribe for shares in Barclays Global Investors UK Holdings Limited between 2001 and 2010 and at a price of £6.11.

The Woolwich ESOP and SAYE schemes have similar terms to the Barclays ESOS and SAYE schemes described above, issuing options over shares in Woolwich plc. No further awards will be made under either of these schemes. Following the acquisition of The Woolwich by Barclays PLC holders of options under these two schemes were able to rollover the options for an option on the same terms, except for the withdrawal of the performance criteria, over Barclays shares, obtain a cash payment in exchange for cancellation of the options or choose to exercise the options at any time up to 24th April 2001. Upon exercise of an option over Woolwich plc shares, the option holder will receive £1.64 in cash and 0.1175 Barclays shares for each Woolwich share available under the option.
i) Earnings per share
Basic earnings per share under US GAAP differs from UK GAAP (see note 14) only to the extent that income calculated under US GAAP differs from that under UK GAAP.

Diluted EPS measures the effect that existing options would have on the basic EPS if they were to be exercised, by increasing the number of ordinary shares.

Under US GAAP, the number of those increased shares are reduced by the number of shares that could be bought (using the average market price in the year) with the assumed exercise proceeds (actual proceeds arising on exercise plus unamortised compensation costs, where appropriate). Any options that are antidilutive are excluded from this calculation. (An option is antidilutive when the value of the deemed proceeds is greater than the market price used in the above calculation).
2000 1999 1998
Income
£m		 Weighted
average
Share no.
(in millions)		 Per-Share
amount
Pence		 Income
£m		 Weighted
average
Share no.
(in millions)		 Per-Share
amount
Pence		 Income
£m		 Weighted
average
Share no.
(in millions)		 Per-Share
amount
Pence
Basic EPS
Approximate net income (US GAAP) available to ordinary shareholders 2,195 1,514 145.0 1,695 1,497 113.2 1,370 1,510 90.8
Effect of dilutive securities
Employee share options 13 21 19
Other schemes 2 5 4
Diluted EPS 2,195 1,529 143.6 1,695 1,523 111.3 1,370 1,533 89.4
Of the total number of employees’ share options existing at the year end, the following were not included in the dilution calculation above because they were antidilutive:
2000
in millions		 1999
in millions		 1998
in millions
Number of options 17 3 15
Certain incentive plan shares have been excluded from the calculation of the basic EPS as the trustee has waived all dividend and voting rights. These shares are subsequently brought into the diluted earnings per share calculation (called ‘Other schemes’)above.
j) Net unrealised gain on investment securities
Unlisted investment equity securities are outside the scope of SFAS No. 115 ‘Accounting for Certain Investments in Debt and Equity Securities’ and continued to be carried at cost of £175m at 31st December 2000 (1999 £124m). The estimated fair value of these securities was £214m (1999 £136m).

All quoted Investment securities are classified as being ‘available for sale’ and Other debt securities are classified as trading securities (see note 19).

There were no material gross gains or gross losses realised on the transfer of debt and equity securities from the available for sale category into the trading category in 2000 or 1999.

k) Revaluation of property
In 1990 £449m of property revaluation reserve was capitalised by the issue of bonus shares.

l) Loan impairment
SFAS No. 114 applies only to impaired loans, the measurement of which is primarily based upon the present value of expected future cash flows discounted at the loan’s effective interest rate. In certain instances this measurement may reflect the loan’s observable market value, or the fair value of the collateral if the loan is collateral dependent. Smaller balance homogeneous consumer loans that are collectively evaluated for impairment are outside the scope of SFAS No. 114, as are debt securities and leases. At 31st December 2000, the element of impaired loans outside the scope of SFAS No. 114 amounted to £2,525m (1999 £1,808m).

In accordance with SFAS No. 114, the Group’s total impaired loans are those reported as non-performing lendings, less impaired loans outside the scope of SFAS No. 114, and amount to £852m at 31st December 2000 (1999 £801m). Credit risk provisions of £474m, estimated in accordance with SFAS No. 114, were held against these loans (1999 £416m). The average level of such impaired lendings in 2000 was approximately £782m (1999 £892m).

Having compared the value of the impaired loan portfolio calculated in accordance with SFAS No. 114 with the carrying value under UK GAAP, no adjustment was required to either shareholders’ equity at 31st December 2000 or 31st December 1999, or to net income for these years.

Where cash received represents the realisation of security, or there is doubt regarding the recovery of a loan, such receipts are treated as repayments of the loan principal. Otherwise, cash received in respect of impaired loans is recognised as interest income. Estimated interest income which was recognised in 2000 on impaired loans within the scope of SFAS No. 114 was £25m (1999 £6m).

SFAS No. 114 modifies the accounting for in-substance foreclosure, in that only collateralised loans where the Group takes physical possession of the collateral, regardless of formal insolvency procedures, would be reclassified as ‘other real estate owned’ under US GAAP. At 31st December 2000, other real estate owned including borrowings which would be classified as in-substance foreclosure, amounted to approximately £19m (1999 £4m) and are recorded at the lower of cost or market value.

m) Impairment of long-lived assets
With effect from 1st January 1996, the Group adopted SFAS No. 121 ‘Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of’. At 31st December 2000 having compared the value of long-lived assets calculated in accordance with SFAS No. 121 with the carrying value under UK GAAP, no adjustment to net income or shareholders’ funds was required.

n) Restructuring
During both 1999 and 2000 the Group has implemented programmes to reduce the workforce primarily in Retail Financial Services and Corporate Banking and, for 2000, Service Provision. This restructuring largely focused on activities within the UK involving a reshaping of the Group’s operations through the centralisation of core processes and the application of new technologies. The Retail Financial Services programmes also include a reduction in the workforce in its international operations.

During 2000 a restructuring charge of £232m was booked, reflecting severance and other termination related costs (£171m) costs in connection with planned disposition of certain facilities (£27m) and other related costs (£34m).

The 1999 restructuring charge of £344m, reflected severance and other termination related costs (£192m), costs in connection with planned disposition of certain facilities (£134m) and other related costs (£18m).

In the year ended 31st December 1997 a restructuring charge, excluding goodwill, of £340m was raised under UK GAAP in relation to the reorganisation of the Group’s investment banking and trading businesses. Under US GAAP some £304m of this charge would have been recognised in 1997. In 1999 the remaining £19m of the residual UK GAAP charge of £36m became effective for US GAAP purposes.

o) Other EITF 94-3 disclosures
For exit plans which meet the conditions of EITF 94-3 as clarified by SAB 100, the US GAAP balance sheet liability at 31st December 2000 would have been £117m (1999 £184m) of which £64m (1999 £89m) was in respect of staff reduction costs covering 2,000 employees (1999 2,400), £49m (1999 £94m) in respect of the planned disposition of certain facilities and £4m (1999 £1m) covering other related costs. Costs paid in the year to 31st December 2000 amounted to £180m (1999 £103m) in respect of staff reduction 4,800 employees (1999 3,500), £72m (1999 £40m) relating to disposition of facilities and £32m, (1999 £17m) for other related costs.
p) Internal use Software 2000 1999
£m £m £m £m
Additional US GAAP shareholders’ funds brought forward 95 –
Expenditure to be capitalised under US GAAP
185
(62)
116
(21)
Amortisation
Credit to US GAAP net income 123 95
Additional US GAAP shareholders’ funds carried forward 218 95
q) Internal hedging
The US GAAP adjustment arises from marking to market internal hedging transactions involving derivatives, entered into from 1st January 1999, that have not been passed directly to the market. Under UK GAAP, these transactions are measured as hedges on an accrual accounting basis in accordance with the accounting treatment of the transactions being hedged. These activities are described more fully in Treasury asset and liability management.

r) Mortgage incentives
The US GAAP adjustment arises from deferring costs relating to cashbacks and discounts given and amortising these over the expected life of the loan.

s) Special purpose vehicles
Group entities have sponsored vehicles that do not meet the consolidation criteria of quasi-subsidiaries under FRS 5 but nevertheless fall to be consolidated under US GAAP and a resultant pre-tax US GAAP adjustment has been made to recharacterise net income from the vehicle as intra-group for US purposes, and to increase total assets by £3,754m.

t) Transfer and servicing of financial assets and extinguishment of liabilities
With effect from 1st January 1997, the Group adopted SFAS No. 125 ‘Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities’. At 31st December 2000, the application of this standard resulted in an addition to US GAAP total assets of £256m in respect of funded loan participations which did not meet the SFAS requirements for derecognition. At 31st December 1999 the addition to US GAAP total assets amounted to £128m in respect of funded loan participations which did not meet the SFAS requirements for derecognition. No adjustment to net income or shareholders’ funds was required for 2000 or 1999.

The Group enters into Reverse Repos (see Total assets and liabilities) and and stock borrowing transactions which are accounted for as collateralised loans. It is the Group’s policy to seek collateral at the outset equal to 100% to 105% of the loan amount. The level of collateral held is monitored daily and further calls made to bring the level of cash held and the market value of collateral in line with the loan balance.

Under certain Reverse Repo and stock borrowing transactions the Group is allowed to sell or repledge the collateral held. At 31st December 2000, the fair value of such collateral was £64bn, of which £51bn related to items that have been sold or repledged.

The Group also enters into repos (see Total assets and liabilities) and stock lending transactions which are accounted for as secured borrowings. At 31st December 2000, the Group had given £56bn of collateral in respect of these transactions. Of the total collateral given £47bn was on terms which gave the recipient the right to sell or repledge comprising debt securities of £40bn and equity securities of £7bn. The residual £9bn was on terms by which the counterparty cannot sell or repledge related to debt securities.

For the pledge of collateral to secure on-balance sheet liabilities see note 42 and in relation to contingent liabilities generally in support of the performance of a customer to third parties see note 45.

u) Provisions for bad and doubtful debts
The UK GAAP specific provision charge in 2000 included a £nil release (1999 £13m release) in respect of credit losses in derivatives. No element of the year end specific provisions related to credit losses in derivatives (1999 £nil).

At 31st December 2000 some £29m of the general provision (December 1999 some £30m) was held in respect of off balance sheet exposures (including derivatives).

Specific provisions for contingent liabilities and commitments are accounted for separately (see note 34).

v) Own shares
In accordance with ARB No. 51, Barclays PLC shares shown for UK GAAP within Other assets in note 25 have been netted against US GAAP shareholders’ equity.

w) Total assets
In addition to the adjustments to total assets arising from the GAAP differences dealt with in the first tables in this section, and notes s), t), v) and y), there are other adjustments resulting from differences in GAAP including the treatment of acceptances. At 31st December 2000 the increase in total assets under US GAAP from these other adjustments amounted to £511m (1999 £2,637m).

x) Profit and loss account presentation
There are certain differences in the presentation of the profit and loss account between UK GAAP and US GAAP. For example, profits or losses on redemption of loan capital (2000 £2m, 1999 £3m, 1998 £3m) would be classified as an extraordinary item under US GAAP rather than as a component of net interest income, while profit on disposal of Group undertakings (2000 £214m profit, 1999 £138m loss,1998 £1m profit) would be classified as operating income or expense under US GAAP rather than being shown separately. Under US GAAP, net interest paid 2000 £216m (1999 £31m, 1998 £25m) relating to trading activities would be shown within net interest revenue, rather than included in dealing profits.

y) Offset
Certain repurchase and reverse repurchase transactions have been netted in the UK as required under FRS 5. To the extent these arrangements do not satisfy the requirement of FIN 41 total assets have been increased by £6,900m.