RBS 2005 Annual Report Download - page 54

52
Operating and financial review
Presentation of information
In the Report and Accounts, and unless specified otherwise,
the term ‘company’ means The Royal Bank of Scotland Group
plc, ‘RBS’ or the ‘Group’ means the company and its subsidiary
undertakings, ‘the Royal Bank’ means The Royal Bank of
Scotland plc and ‘NatWest’ means National Westminster Bank Plc.
The company publishes its financial statements in pounds
sterling (“£” or “sterling”). The abbreviations ‘£m’ and ‘£bn’
represent millions and thousands of millions of pounds
sterling, respectively, and references to ‘pence’ represent
pence in the United Kingdom (“UK”). Reference to ‘dollars’ or
‘$’ are to United States of America (“US”) dollars. The
abbreviations ‘$m’ and ‘$bn’ represent millions and thousands
of millions of dollars, respectively, and references to ‘cents’
represent cents in the US. The abbreviation ‘€’ represents the
‘euro’, the European single currency and the abbreviations ‘€m’
and ‘€bn’ represent millions and thousands of millions of euros,
respectively.
Certain information in this report is presented separately for
domestic and foreign activities. Domestic activities primarily
consist of the UK domestic transactions of the Group. Foreign
activities comprise the Group’s transactions conducted
through those offices in the UK specifically organised to
service international banking transactions and transactions
conducted through offices outside the UK.
The geographic analysis in the average balance sheet and
interest rates, changes in net interest income and average
interest rates, yields, spreads and margins in this report have
been compiled on the basis of location of office – UK and
Overseas. Management believes that this presentation
provides more useful information on the Group’s yields,
spreads and margins of the Group’s activities than would be
provided by presentation on the basis of the domestic and
foreign activities analysis used elsewhere in this report as it
more closely reflects the basis on which the Group is
managed. ‘UK’ in this context includes domestic transactions
and transactions conducted through the offices in the UK
which service international banking transactions.
The Group distinguishes its trading from non-trading activities
by determining whether a business unit’s principal activity is
trading or non-trading and then attributing all of that unit’s
activities to one portfolio or the other. Although this method
may result in some non-trading activity being classified as
trading, and vice versa, the Group believes that any resulting
misclassification is not material.
International Financial Reporting Standards
As required by the Companies Act 1985 and Article 4 of the
European Union IAS Regulation, the consolidated financial
statements of the Group have been prepared, for the first time,
in accordance with International Financial Reporting Standards
adopted by the International Accounting Standards Board
(IASB) and interpretations issued by the International Financial
Reporting Interpretations Committee of the IASB (together
‘IFRS’) as endorsed by the European Union. The Group,
however, has taken advantage of the option in IFRS 1 ‘First-
time Adoption of International Financial Reporting Standards’
to implement IAS 39 ‘Financial Instruments: Recognition and
Measurement’ (IAS 39), IAS 32 ‘Financial Instruments:
Disclosure and Presentation’ (IAS 32) and IFRS 4 ‘Insurance
Contracts’ (IFRS 4) from 1 January 2005 without restating its
2004 income statement and balance sheet.
The Group’s 2004 financial statements were prepared in
accordance with then current UK generally accepted
accounting principles (“UK GAAP” or “previous GAAP”)
comprising standards issued by the UK Accounting Standards
Board, pronouncements of the Urgent Issues Task Force,
relevant Statements of Recommended Accounting Practice
and provisions of the Companies Act 1985. The Group also
presents information under generally accepted accounting
principles in the US (“US GAAP”).
To allow more meaningful comparison with the 2005 results,
pro forma results have been prepared for 2004. The pro forma
results include the effect of standards relating to financial
instruments and insurance contracts (IAS 32, IAS 39 and
IFRS 4) and the basis of preparation of these results is
described on page 57.