RBS 2005 Annual Report Download - page 216

214
Notes on the accounts
UK GAAP
(t) Offset
Under UK GAAP an intention to settle net is not a requirement
for set off; the entity must have the ability to insist on net
settlement and that ability is assured beyond doubt.
(u) Insurance contracts
All contracts within the life assurance business are accounted
for as insurance contracts and the obligations to policyholders
presented as Long-term assurance liabilities attributable to
policyholders.
The value placed on in-force policies includes future
investment margins.
(v) Linked presentation
FRS 5 ‘Reporting the Substance of Transactions’ allows
qualifying transactions to be presented using the linked
presentation.
(w) Extinguishment of liabilities
Under UK GAAP, recognition of a financial liability ceases once
any transfer of economic benefits to the creditor is no longer likely.
IFRS
For a financial asset and a financial liability to be offset, IFRS
require that an entity must intend to settle on a net basis or to
realise the asset and settle the liability simultaneously.
On implementation of IAS 32, the balance sheet value
of financial assets and financial liabilities increased by
£104 billion.
IFRS 4 requires life assurance products to be classified
between insurance contracts and investment contracts. The
latter are accounted for in accordance with IAS 39. Insurance
contracts continue to be accounted for using the embedded
value methodology.
The value of in-force policies excludes any amounts that reflect
future investment margins.
There is no linked presentation under IFRS. If substantially all
the risks and rewards have been retained, the gross assets
and related funding are presented separately.
A financial liability is removed from the balance sheet when,
and only when, it is extinguished i.e. when the obligation
specified in the contract is discharged or cancelled or expires.
Notes on the accounts continued
45 Transition to IFRS (continued)