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Notes to the consolidated
financial statements
Annual Report 2006 33
Accounting and valuation policies
Balance Sheet
Intangible assets
Intangible assets include goodwill and other intangible assets such as exclusivity fees and
software purchased from others or developed in-house.
Goodwill represents the difference between the purchase price of subsidiaries and the
proportionate share of their net assets valued at the current value of all assets and liabilities
at the time of acquisition. Goodwill is recognised as an asset in the balance sheet and is not
amortised.
The Mondial Assistance Group periodically evaluates the recoverability of Goodwill and takes
into account events or circumstances that warrant revised estimates of useful lives or that
indicate the existence of an impairment. Impairment testing for goodwill is carried out at least
annually, at the end of the year and at each reporting date, whenever there is an indication
that an asset maybe impaired. The impairment is recognized through the income statement
and the reversal of an impairment loss is prohibited.
Intangible assets are measured initially at cost and are recognised if it is probable that the
future economic benefits that are attributable to the asset will flow to the Group, and the cost
of the asset can be measured reliably. After initial recognition, intangible assets are measured
at cost less accumulated amortisation and any accumulated impairment losses.
Other intangible assets are amortised using the straight-line method over their estimated period
of benefit with a maximum of 5 years.
Tangible assets
Tangible assets include property and other tangible assets such as equipment.
Property used for own use and equipment is stated at cost and depreciated using the straight-
line method over the shorter of the estimated life of the asset or the lease term. Land is not
depreciated. Buildings are depreciated over 50 years, while other tangible assets included
under the heading “Other assets” over a period of their estimated useful life at the date of
purchase.
The Group recognises finance leases as assets and liabilities in the balance sheets at amounts
equal at the inception of the lease to the fair value of the leased property. Initial direct costs
incurred are included as part of the asset. Lease payments are apportioned between the
finance charge and the reduction of the outstanding liability. The finance charge is allocated
to periods during the lease term so as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period.
A finance lease gives rise to depreciation expense for the asset as well as a finance expense
for each accounting period. The depreciation policy for leased assets is consistent with that
for other depreciable assets.
Investments
Investments include securities available for sale, participations, mortgages and loans.
Securities available for sale are accounted for at fair value. Positive and negative differences
between market value and cost or amortised cost are included in a separate component of
shareholders’ equity, net of deferred tax. Realised gains and losses are principally determined
by applying the average cost method.
Accounts receivable
The accounts receivable are carried at nominal value less any necessary value adjustment.
Deferred acquisition costs
Deferred acquisition costs, which are incurred in connection with the acquisition or renewal of
insurance policies, are capitalised and amortised through the income statement over the term
of the policies.
Cash and cash equivalents
This item includes balances with banks payable on demand, cash on hand and bank deposits
with a maturity of three months or less at the date of purchase.
The carrying amount of cash with banks and cash on hand corresponds to the fair value. Cash
funds are stated at their face value, with holdings of foreign notes and coins valued at year-
end closing.