RBS 2012 Annual Report Download - page 363

RBS GROUP 2012
361
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
A non-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 disposal of the
discontinued operation - are shown as a single amount on the face of the
income statement; an analysis of this amount is presented in Note 20 on
the accounts. 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. Employees may
receive variable compensation satisfied by cash, by debt instruments
issued by the Group or by RBSG shares. 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
clawback 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).
A net 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.
6. Intangible assets and goodwill
Intangible assets acquired by the Group are stated at cost less
accumulated amortisation and impairment losses. Amortisation is
charged to profit or loss over the assets' estimated economic lives using
methods that best reflect the pattern of economic benefits and included in
Depreciation and amortisation. These estimated useful economic lives
are:
Core deposit intangibles 6 to 10 years
Other acquired intangibles 5 to 10 years
Computer software 3 to 12 years
Expenditure on internally generated goodwill and brands is written-off as
incurred. Direct costs relating to the development of internal-use
computer software are capitalised once technical feasibility and economic
viability have been established. These costs include payroll, the costs of
materials and services, and directly attributable overheads. Capitalisation
of costs ceases when the software is capable of operating as intended.
During and after development, accumulated costs are reviewed for
impairment against the benefits that the software is expected to generate.
Costs incurred prior to the establishment of technical feasibility and
economic viability are expensed as incurred as are all training costs and
general overheads. The costs of licences to use computer software that
are expected to generate economic benefits beyond one year are also
capitalised.
Intangible assets include goodwill arising on the acquisition of
subsidiaries and joint ventures. Goodwill on the acquisition of a
subsidiary is the excess of the fair value of the consideration transferred,
the fair value of any existing interest in the subsidiary and the amount of
any non-controlling interest measured either at fair value or at its share of
the subsidiary’s net assets over the Group's interest in the net fair value
of the subsidiary’s identifiable assets, liabilities and contingent liabilities.
Goodwill arises on the acquisition of a joint venture when the cost of
investment exceeds the Group’s share of the net fair value of the joint
venture’s identifiable assets and liabilities. Goodwill is measured at initial
cost less any subsequent impairment losses. Goodwill arising on the
acquisition of associates is included within their carrying amounts. The
gain or loss on the disposal of a subsidiary, associate or joint venture
includes the carrying value of any related goodwill.