RBS 2006 Annual Report Download - page 218
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RBS Group • Annual Report and Accounts 2006 217
Financial statements
US GAAP
US GAAP requires the same treatment of purchased goodwill.
This was adopted by the Group from 1 July 2001. Prior to this
goodwill was recognised as an asset and amortised over
periods of up to 25 years. No amortisation was written back on
this change of policy.
For US GAAP purposes the Group recognised intangible
assets separately from goodwill from 1 July 2001. This has
resulted in the recognition of additional intangible assets and
consequently a higher amortisation charge under US GAAP.
(2) Implementation timing differences
This section sets out those adjustments that, although the applicable IFRS and US GAAP standards are substantially the same, arise
because their effective dates for the Group differ.
IFRS
Intangible assets
Purchased goodwill
Purchased goodwill is recorded at cost less any accumulated
impairment losses. Goodwill is tested annually (at 30 September)
for impairment or more frequently if events or changes in
circumstances indicate that it might be impaired.
Goodwill arising on acquisitions after 1 October 1998 was
capitalised and amortised over its estimated useful economic
life. Goodwill arising on acquisitions before 1 October 1998
was deducted from equity. The carrying amount of goodwill in
the Group's opening IFRS balance sheet was its carrying value
under UK GAAP as at 31 December 2003.
There was no restatement of previous acquisitions in 1998.
In 2004 no amortisation was written back.
Other intangibles
Until 2004 intangible assets acquired in a business
combination were recognised separately from goodwill only if
they were separable and reliably measurable. From 1 January
2004 intangible assets are recognised if they are separable or
arise from contractual or other legal rights. All intangible assets
are amortised over their useful economic lives.
(3) For 2004
As permitted by IFRS 1, in the preparation of the Group’s 2004 consolidated income statements and balance sheets, all IFRS have
been applied except those relating to financial instruments and insurance contracts where UK GAAP principles then current have
been applied.
IFRS or relevant UK GAAP
(a) Acquisition accounting
All integration costs relating to acquisitions are expensed as
post-acquisition expenses.
US GAAP
Certain restructuring and exit costs incurred in the acquired
business are treated as liabilities assumed on acquisition and
taken into account in the calculation of goodwill.
Other adjustments in the reconciliation of net income from IFRS to US GAAP for the year ended 31 December 2005 include refinements
to estimates arising from the implementation of IFRS.