RBS 2011 Annual Report Download - page 317

RBS Group 2011 315
Payment services - this comprises income received for payment services
including cheques cashed, direct debits, Clearing House Automated
Payments (the UK electronic settlement system) and BACS payments
(the automated clearing house that processes direct debits and direct
credits). These are generally charged on a per transaction basis. The
income is earned when the payment or transaction occurs. Charges for
payment services are usually debited to the customer's account monthly
or quarterly in arrears. Income is accrued at period end for services
provided but not yet charged.
Card related services - fees from credit card business include:
xCommission received from retailers for processing credit and debit
card transactions: income is accrued to the income statement as the
service is performed.
xInterchange received: as issuer, the Group receives a fee
(interchange) each time a cardholder purchases goods and services.
The Group also receives interchange fees from other card issuers
for providing cash advances through its branch and automated teller
machine networks. These fees are accrued once the transaction has
taken place.
xAn annual fee payable by a credit card holder is deferred and taken
to profit or loss over the period of the service i.e. 12 months.
Insurance brokerage - this is made up of fees and commissions received
from the agency sale of insurance. Commission on the sale of an
insurance contract is earned at the inception of the policy, as the
insurance has been arranged and placed. However, provision is made
where commission is refundable in the event of policy cancellation in line
with estimated cancellations.
Investment management fees - fees charged for managing investments
are recognised as revenue as the services are provided. Incremental
costs that are directly attributable to securing an investment management
contract are deferred and charged as expense as the related revenue is
recognised.
Insurance premiums - see Accounting policy 12.
4. Assets held for sale and discontinued operations
Anon-current asset (or disposal group) is classified as held for sale if the
Group will recover its carrying amount principally through a sale
transaction rather than through continuing use. A non-current asset (or
disposal group) classified as held for sale is measured at the lower of its
carrying amount and fair value less costs to sell. If the asset (or disposal
group) is acquired as part of a business combination it is initially
measured at fair value less costs to sell. Assets and liabilities of disposal
groups classified as held for sale and non-current assets classified as
held for sale are shown separately on the face of the balance sheet.
The results of discontinued operations - comprising the post-tax profit or
loss of discontinued operations and the post-tax gain or loss recognised
either on measurement to fair value less costs to sell or on the disposal of
the discontinued operation - are shown as a single amount on the face of
the income statement. A discontinued operation is a cash-generating unit
or a group of cash-generating units that either has been disposed of, or is
classified as held for sale, and (a) represents a separate major line of
business or geographical area of operations, (b) is part of a single co-
ordinated plan to dispose of a separate major line of business or
geographical area of operations or (c) is a subsidiary acquired exclusively
with a view to resale.
5. Employee benefits
Short-term employee benefits, such as salaries, paid absences, and
other benefits are accounted for on an accruals basis over the period in
which the employees provide the related services. Group employees
may receive variable compensation satisfied by cash, by debt
instruments issued by the Group or by shares in The Royal Bank of
Scotland Group plc. The treatment of share-based compensation is set
out in Accounting policy 25. Variable compensation that is settled in cash
or debt instruments is charged to profit or loss over the period from the
start of the year to which the variable compensation relates to the
expected settlement date taking account of forfeiture and claw back
criteria.
The Group provides post-retirement benefits in the form of pensions and
healthcare plans to eligible employees.
For defined benefit schemes, scheme liabilities are measured on an
actuarial basis using the projected unit credit method and discounted at a
rate determined by reference to market yields at the end of the reporting
period on high quality corporate bonds of equivalent term and currency to
the scheme liabilities. Scheme assets are measured at their fair value.
The difference between scheme assets and scheme liabilities is
recognised in the balance sheet as an asset (surplus) or liability (deficit).
Anet surplus is limited to any unrecognised past service cost plus the
present value of any economic benefits available to the Group in the form
of refunds from the plan or reduced contributions to it. The current service
cost, curtailments and any past service costs together with the expected
return on scheme assets less the unwinding of the discount on scheme
liabilities are charged to operating expenses. A gain or loss on a
curtailment is recognised in profit or loss when the curtailment occurs. A
curtailment occurs when the Group is committed to making a significant
reduction in the number of employees covered by a plan or a plan is
amended such that future service qualifies for no or reduced benefits.
Actuarial gains and losses are recognised in full in the period in which
they arise in other comprehensive income. Contributions to defined
contribution pension schemes are recognised in profit or loss when
payable.