CFM90960 - Debt cap: financial services groups: income statement of a financial services group: example

This guidance applies to worldwide group periods of account ending before or straddling 1 April 2017.

Part of an income statement of a fictitious financial services group

The following is an extract from an income statement from the consolidated financial statements of a fictitious financial services group and shows the make up of the worldwide trading income and which amounts are in respect of qualifying activities.

The example is very straightforward, in that the income from qualifying activities can be identified just from the figures reported in the income statement.

Intra-group transactions should not be included in these figures because the accounts show the consolidated position for the group.

In practice groups will very likely have to breakdown the headline figures reported in the income statement to establish whether particular amounts of income arise from qualifying activities.

Consolidated income statement for the year ended 31 December (in million of £)	2012	2011
Continuing operations	-	-
Interest income (see note below)	90,000	70,000
Interest expense	- 75,000	- 56,000
Net interest income	15,000	14,000
Fee and commission income (see note below)	10,000	8,000
Fee and commission expenses	- 2,000	- 1,000
Net fee and commission income	8,000	7,000
Gross insurance premiums written (see note below)	20,000	15,000
Insurance premiums ceded to reinsurers	- 1,000	- 1,000
Premiums written net of re-insurance	19,000	14,000
Net change in provision of unearned premiums	500	- 500
Net written insurance premiums	19,500	13,500
Net trading income (see note below)	4,000	1,500
Net investment income (see note below)	3,000	2,500
Other income (see note below)	2,000	1,000
Total income	51,500	39,500
Insurance claims	- 16,000	- 12,000
Total income net of insurance claims	35,500	27,500
Impairment charges	- 10,000	- 8,000
Net income	25,500	19,500
Staff costs	- 5,000	- 4,000
General and administrative expenses	- 4,000	-3,000
Depreciation of property, plant and equipment	- 1,000	- 1,000
Amortisation of intangible assets	- 1,000	- 1,000
Operating expenses	- 11,000	- 9,000
Share of profits in associates and joint ventures	2,000	1,000
Profit on disposal of subsidiaries, associates and JVs	-	500
Gains on acquisition	500	-
Profit before tax	17,000	12,000

Note: entries showing ‘(see note below)’ show the amounts that are included in the calculation of the worldwide trading income.

For 2011 the group had worldwide trading income of £98m, of which, assuming that the net trading income is from qualifying activities, at least £94.5m is likely to be derived from qualifying activities. The £94.5m is the total of the gross interest income, gross fee and commission income, gross insurance premiums written and net trading income.

For 2012 the group had worldwide trading income of £129m, of which, again assuming that the net trading income is from qualifying activities, at least £124m is likely to be derived from qualifying activities. The £124m is the total of the gross interest income, gross fee and commission income, gross insurance premiums written and net trading income.

In both years it is likely that the group will be a qualifying financial services group.