RBS 2004 Annual Report Download - page 182

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Notes on the accounts
Notes on the accounts continued
42 Acquisitions
The Group made a number of acquisitions during the year, all of which were accounted for using acquisition accounting principles.
(a) Charter One
Charter One Financial, Inc. was acquired by Citizens in August 2004 for a cash consideration of US$10.1 billion. The acquisition has
extended Citizen's coverage to North Eastern and Mid Western States of the US and will enable Citizens to achieve a significant
increase in the scale of its activities.
Although not required, as it is not a material acquisition for the Group, separate purchase accounting disclosures for Charter One
Financial, Inc. are set out below. The provisional fair values of the assets and liabilities acquired and the consideration paid are
shown in the table below:
Book value of
net assets Fair value Fair value to
acquired adjustments the Group
At date of acquisition £m £m £m
Cash and balances at central banks 330* — 330
Loans and advances to customers 18,287 (274) 18,013
Debt securities 3,107 (26) 3,081
Equity shares 381 — 381
Tangible fixed assets 699 — 699
Other assets 740 (2) 738
Deposits by banks (5,579) — (5,579)
Customer accounts (15,823) (28) (15,851)
Other liabilities (49) (45) (94)
Deferred tax provisions (534) 46 (488)
Post-retirement pension liabilities (17) — (17)
Dated loan capital (222) (22) (244)
Net assets acquired 1,320* (351) 969
Goodwill 4,654
Total consideration 5,623
Satisfied by:
Payment of cash 5,611
Fees and expenses relating to the acquisition 12
5,623
* Reduced by £307 million (US$553 million) paid out by Charter One immediately prior to closing principally in respect of the buyout of
employee stock options. Gross of this amount, consideration was £5,930 million (US$10,677 million) and the book value of net assets
acquired £1,627 million (US$2,929 million).
Fair value adjustments reflect the restatement of balances to their estimated fair values at the date of acquisition, and the related tax effect.
The estimated contribution to the Group’s results, before funding costs of Charter One, for the year ended 31 December 2004
is shown below:
Four months ended
31 December 2004
£m
Net interest income 220
Non-interest income 129
Total income 349
Operating expenses (177)
Contribution before provisions 172
Provisions (16)
Contribution before goodwill amortisation 156
Goodwill amortisation (76)
Contribution 80
The contribution above is after charging goodwill amortisation and includes the post-acquisition effect of fair value adjustments.