RBS 2008 Annual Report Download - page 257

RBS Group Annual Report and Accounts 2008256
Notes on the accounts continuedNotes on the accounts continued
Amendments
Pre-acquisition Provisional to provisional Recognised
carrying Disposal fair value fair value acquisition
amounts groups(1) adjustments(2) adjustments values(2)
£m £m £m £m £m
Cash and balances at central banks 7,263 (186) ——7,077
Loans and advances to banks 120,120 (3,646) ——116,474
Loans and advances to customers 314,287 (26,158) (1,843) (699) 285,587
Treasury and other eligible bills and debt and equity securities 166,018 (3,804) ——162,214
Derivatives 86,695 (322) ——86,373
Intangible assets 4,239 (3,522) 4,282 788 5,787
Property, plant and equipment 2,062 (747) 175 (5) 1,485
Other assets 32,710 (7) 1,357 (180) 33,880
Assets of disposal groups (1) 2,987 38,392 787 (98) 42,068
Deposits by banks (160,906) 2,808 (321) 322 (158,097)
Customer accounts (253,583) 13,786 (152) 2 (239,947)
Debt securities in issue (134,630) 5,937 776 (551) (128,468)
Settlement balances and short positions (44,748) 36 ——(44,712)
Derivatives (85,491) 417 ——(85,074)
Subordinated liabilities (11,748) 868 685 (61) (10,256)
Other liabilities (21,268) 271 (1,814) (114) (22,925)
Liabilities of disposal groups (1) (2,377) (24,123) ——(26,500)
Net identifiable assets and liabilities 21,630 — 3,932 (596) 24,966
Minority interests (242)
Goodwill on acquisition 23,851
Consideration 48,575
Satisfied by:
Issue of 531 million ordinary shares of the company 2,719
Cash 45,786
Fees and expenses relating to the acquisition 70
Consideration 48,575
Net cash:
Cash consideration 45,856
Cash acquired (60,093)
14,237
Notes:
(1) Banca Antonveneta SpA. and ABN AMRO’s asset management business were identified as disposal groups on the acquisition of ABN AMRO and sold during 2008. In addition, under the terms of
the Consortium and Shareholders’ Agreement, consortium members other than the Group agreed to acquire, in due course, various ABN AMRO businesses including operations in Brazil (sold 1
July 2008), the commercial and retail businesses in the Netherlands, the private clients business and Interbanca.
(2) The initial accounting for the acquisition was determined provisionally at 31 December 2007 because of its complexity and the limited time available between the acquisition and the preparation
of the 2007 financial statements. The principal adjustments, excluding reclassifications, on finalising fair values were:
(a) The Group’s methodology for calculating the fair value of trading financial instruments produced values lower by £524 million than those recorded by ABN AMRO;
(b) Following further work on identifying intangible assets, additional customer relationship assets and core deposit intangibles of £724 million have been recognised;
(c) Net assets of the Netherlands pension scheme have been reduced by £250 million.
(d) The fair value of private equity investments was reduced by £98 million based on additional evidence provided by disposals in 2008;
(e) The liability for instruments issued by conduits should be increased by £366 million;
No material change was required to the deferred tax effect of fair value adjustments.
It is estimated that the Group would have reported total income of £37.2 billion and profit after tax of £7.7 billion from continuing operations for the year
ended 31 December 2007 had all acquisitions occurred on 1 January 2007. These results would not have been materially affected by the finalisation
of fair values.
34 Analysis of the net investment in business interests and
intangible assets
(a) Acquisition of ABN AMRO
On 17 October 2007, the Group, through its subsidiary RFS Holdings
B.V. (RFS), acquired 99% of the ordinary shares of ABN AMRO Holding
N.V., the holding company of a major European banking group based in
the Netherlands with subsidiaries that undertake commercial banking
operations, investment banking and other related financial activities.
During 2008, RFS acquired the remaining 1% of the ordinary shares of
ABN AMRO.
The provisional fair values of ABN AMRO’s assets and liabilities at the
date of acquisition were finalised as follows: