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36 Mondial Assistance Annual Report 2008
Financial results
Restatement of 2007
A detailed actuarial review performed
during 2008 has shown that the income
recognition policy for certain contracts
in the US, Australian, and Portuguese
Business Units requires adjustment
and this has led to a restatement being
required of the 2007 results.
These entities used to recognize the pre-
mium income in full when the policy was
issued without considering the period of
the contract because the unearned pre-
mium was believed to be immaterial.
The contracts requiring these adjust-
ments are:
for US: mainly travel insurance con-•
tracts with an average duration of
3 months;
for Australia: travel insurance con-•
tracts with an average duration of
2.5 months and health medical care
for foreign students with an average
duration of 3-4 years;
for Portugal: roadside (yearly policy) •
and automotive maintenance con-
tracts (average duration 4.5 years).
The total reserve adjustment required
can be summarized as follows:
CONVERTED TO EUROS
(12.2008 EXCHANGE RATE)
31.12.2006 31.12.2007 31.12.2008 DEVIATION
2007
RECORDED
2007
RESTA-
TEMENT
DEVIATION
2008
Portugal (1,605) (3,096) (3,478) (1,491) (1,491) (382)
Australia (11,712) (8,234) (9,258) 3,478 (1,729) 5,207 (1,025)
USA (6,894) (6,328) (7,313) 566 (2,565) 3,131 (985)
Total (20,211) (17,658) (20,049) 2,553 (4,294) 6,847 (2,391)
The tax rates applied to these adjust-
ments are :
Portugal: 26.50%;•
USA: 35%;•
Australia: 30%.•
Accounting
and valuation policies
BALANCE SHEET
Intangible fi xed assets
Intangible fi xed 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 subsi-
diaries 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 perio-
di cally evaluates the recoverability of
Goodwill and takes into account events
or circums tances that indicate the exis-
tence of an impairment. Impairment
testing for goodwill is carried out at
least annually, at the end of the year. The
impairment is recognized through the
income statement and the reversal of an
impairment loss is prohibited.
Other intangible fi xed assets are mea-
sured initially at cost and are recognised
if it is probable that the future economic
benefi ts that are attributable to the asset
will fl ow to the Group and the cost of the
asset can be measured reliably. After initial
recognition, other intangible fi xed assets
are measured at cost less accumulated
amortisation and any accumulated
impairment losses.
Other intangible fi xed assets are amor-
tised using the straight-line method over
their estimated period of benefi t with a
maximum of 5 years.
Tangible fi xed assets
Tangible fi xed assets include property
and other tangible fi xed assets such as
equipment.
Property used for own use and equip-
ment 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 depre-
ciated. Buildings are depreciated over a
maximum of 50 years in accordance with
the useful life of the building, while other
tangible fi xed assets are depreciated over
the period of their estimated useful life at
the date of purchase which is between
3 and 10 years.
The Group recognises fi nance leases as
assets and liabilities in the balance sheet
at the amount 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 fi nance charge and the reduction
of the outstanding liability. The fi nance
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 fi nance lease gives rise to deprecia-
tion expense for the asset as well as a
fi nance 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, investments at fair value through
profi t & loss, mortgages, long term bank
deposits 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.
Investments at fair value through profi t
& loss are accounted for at fair value.
Changes in fair value are included in
profi t and loss.
Mortgages, long term bank deposits
and loans are valued at cost less any
necessary value adjustment.
Accounts receivable
Accounts receivable are carried at nominal
value less any necessary value adjust-
ment.
Deferred acquisition costs
Deferred acquisition costs, which are
incurred in connection with the acqui-
sition or renewal of insurance policies,
are capitalised and amortised through
the income statement over the term of
the policies.