RBS 2008 Annual Report Download - page 189

Accounting policies continued
RBS Group Annual Report and Accounts 2008188
Accounting developments
International Financial Reporting Standards
The International Accounting Standards Board issued a revised IAS 23
‘Borrowing Costs’ in March 2007. Entities are required to capitalise
borrowing costs attributable to the development or construction of
intangible assets or property plant or equipment. The standard is
effective for accounting periods beginning on or after 1 January 2009
and is not expected to have a material effect on the Group or company.
The IASB issued a revised IAS 1 ‘Presentation of Financial Statements’
in September 2007 effective for accounting periods beginning on or
after 1 January 2009. The amendments to the presentation requirements
for financial statements are not expected to have a material effect on the
Group or company.
The IASB published a revised IFRS 3 ‘Business Combinations’ and
related revisions to IAS 27 ‘Consolidated and Separate Financial
Statements’ following the completion in January 2008 of its project on
the acquisition and disposal of subsidiaries. The standards improve
convergence with US GAAP and provide new guidance on accounting
for changes in interests in subsidiaries. The cost of an acquisition will
comprise only consideration paid to vendors for equity; other costs will
be expensed immediately. Groups will only account for goodwill on
acquisition of a subsidiary; subsequent changes in interest will be
recognised in equity and only on a loss of control will there be a profit
or loss on disposal to be recognised in income. The changes are
effective for accounting periods beginning on or after 1 July 2009 but
both standards may be adopted together for accounting periods
beginning on or after 1 July 2007. These changes will affect the Group’s
accounting for future acquisitions and disposals of subsidiaries.
The IASB published revisions to IAS 32 ‘Financial Instruments:
Presentation’ and consequential revisions to other standards in February
2008 to improve the accounting for and disclosure of puttable financial
instruments. The revisions are effective for accounting periods
beginning on or after 1 January 2009 but together they may be adopted
earlier. They are not expected to have a material affect on the Group or
the company.
The IASB issued an amendment, 'Vesting Conditions and Cancellations',
to IFRS 2 'Share-based Payment' in January 2008 that will change the
accounting for share awards that have non-vesting conditions. The fair
value of these awards does not currently take account of the effect of
non-vesting conditions and where such conditions are not subsequently
met, costs recognised up to the date of cancellation are reversed. The
amendment requires costs not recognised up to the date of
cancellation to be recognised immediately. The amendment is effective
for accounting periods beginning on or after 1 January 2009. The Group
estimates that adoption will cause a restatement of 2008 results,
reducing profit by £110 million with no material affect on earlier periods.
There is not expected to be a material effect on the company.
The IASB issued amendments to a number of standards in May 2008 as
part of its annual improvements project. The amendments are effective
for accounting periods beginning on or after 1 January 2009 and are
not expected to have a material effect on the Group or company.
Also in May 2008, the IASB issued amendments to IFRS 1 ‘First-time
Adoption of International Financial Reporting Standards’ and IAS 27
‘Consolidated and Separate Financial Statements’ that change the
investor's accounting for the cost of an investment in a subsidiary, jointly
controlled entity or associate. It does not affect the consolidated
accounts but may prospectively affect the company’s accounting and
presentation of receipts of dividends from such entities.
The IASB issued an amendment to IAS 39 in July 2008 to clarify the
IFRS stance on eligible hedged items. The amendment is effective for
accounting periods beginning on or after 1 January 2009 and is not
expected to have a material effect on the Group or the Bank.
The International Financial Reporting Interpretations Committee (IFRIC)
issued interpretation IFRIC 15 ‘Agreements for the Construction of Real
Estate’ in July 2008. This interpretation clarifies the accounting for
construction profits. It is applicable for accounting periods beginning on
or after 1 January 2009 and is not expected to have a material effect on
the Group or company.
The IFRIC issued interpretation IFRIC 16 ‘Hedges of a Net Investment in
a Foreign Operation’ in July 2008. The interpretation addresses the
nature of the hedged risk and the amount of the hedged item; where in
a group the hedging item could be held; and what amounts should be
reclassified from equity on the disposal of a foreign operation that had
been subject to hedging. The interpretation is effective for accounting
periods beginning on or after 1 October 2008 and is not expected to
have a material effect on the Group or company.
The IFRIC issued interpretation IFRIC 17 ‘Distributions of Non-Cash
Assets to Owners’ and the IASB made consequential amendments to
IFRS 5 'Non-Current Assets Held for Sale and Discontinued Operations'
in December 2008. The interpretation requires distributions to be
presented at fair value with any surplus or deficit to be recognised in
income. The amendment to IFRS 5 extends the definition of disposal
groups and discontinued operations to disposals by way of distribution.
The interpretation is effective for accounting periods beginning on or after
1 July 2009, to be adopted at the same time as IFRS 3 (revised 2008),
and is not expected to have a material effect on the Group or company.
The IFRIC issued interpretation IFRIC 18 ‘Transfers of Assets from
Customers’ in January 2009. The interpretation addresses the
accounting by suppliers that receive assets from customers, requiring
measurement at fair value. The interpretation is effective for assets from
customers received on or after 1 July 2009 and is not expected to have
a material effect on the Group or company.