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Mondial Assistance Annual Report 2008 37
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
rates.
Deferred tax
The calculation of deferred tax is based
on temporary differences between the
carrying amounts of assets or liabilities
in the published balance sheet and their
tax basis, and on differences arising from
the application of uniform valuation poli-
cies for consolidation purposes. The tax
rates used for the calculation of deferred
taxes are the local rates applicable in
the countries concerned. Substantively
enacted changes in tax law are already
taken into account as at the balance
sheet date.
Impairment of assets
All assets are reviewed regularly to
ensure that no further value adjustments
are required. Valuation write-downs are
charged to the income statement if an
other than temporary diminution in value
is identifi ed. Write-downs are based on
the relevant estimated recoverable
amounts.
Accounting for operating leases
Equipment and vehicles held under
operating leases, whereby the risks
and benefits relating to ownership of
the assets remain with the lessor, are
not recorded in the balance sheet and
all related expenses are accounted for
in the income statement in the period
they arise.
Technical provisions and deferred
service income
Technical provisions and deferred service
income unearned premium reserves,
deferred service income, claim reserves
and other technical provisions.
Premiums written and service income
attributable to future periods are deferred
under unearned premium reserves res-
pectively under deferred service income
on a pro-rata basis, over the period of
the contract on a daily basis.
Claim reserves are assessed according to
local regulatory requirements, on a case
by case basis and are supplemented
by IBNR reserves (reserves for claims
Incurred But Not Reported) based on
management and statistical estimates.
Non-technical provisions
These include personnel provisions and
similar liabilities, provision for income
taxes and other non-technical provi-
sions.
Pension and similar reserves are cal-
culated taking local circumstances into
account as well as expected future
trends in salaries and wages, retirement
rates and pension increases.
Defined benefit plans are recognised
using the method of accruing actuarial
gains and losses through income.
Provisions for income taxes are calcu-
lated in accordance with the relevant
local tax regulations.
Other liabilities
Other liabilities include deposits retained
from reinsurers, loans, liabilities direct/
indirect business, liabilities with asso-
ciated companies (current accounts),
deferred income and other liabilities.
INCOME STATEMENT
Turnover
Turnover includes insurance premiums
and service income.
Premiums earned
Premiums written for travel insurance are
reported proportionately as income over
the term of the insurance contract on a
daily basis.
Claims and service administration
expenses (internal claims handling
costs ICHC and internal service
handling costs ISHC)
Claims and service handling costs are
assessed according to business man-
agement criteria and reported under
claims incurred and service administra-
tion expenses.
Ordinary result
Interest income and interest expense
are recognised on an accrual basis.
Dividends are recognised as income
when received.
Interest on fi nance leases is recognised
as interest expense over the term of the
respective lease.
Income Taxes
Income tax expense includes current
income taxes and deferred income
taxes.
EXPLANATION OF THE
ACCOUNTING AND
VALUATION POLICIES
DIFFERING
FROM SWISS LAW
The most important differences are sum-
marised below.
Investments available for sale
(afs investments)
Investments available for sale are shown
in the balance sheet at market value
with the unrealised gains / losses being
included under other reserves in share-
holders’ equity.
Investments are recorded at the lower of
cost and market value under the Swiss
Code of Obligations.
Claim equalisation reserves
Claim equalisation reserves and catas-
trophe reserves are not allowed under
Mondial Assistance Group accounting
policies because they do not represent
a present obligation towards third par-
ties.
Claims reserves
Under Mondial Assistance Group
accounting policies, claims reserves
usually are lower than under statutory
accounting principles as they are calcu-
lated at the best estimate of the ultimate
cost. The Swiss Code of Obligations
requires a conservative calculation in
accordance with the prudence prin-
ciples.
Premium receivables /
claims payable
Premium receivables from fronting
transactions are shown net of claims
payable.
Acquisition costs
Under Mondial Assistance Group
accounting policies acquisition costs
are capitalised and amortised over the
term of policy.
Goodwill
Goodwill with an indefi nite useful life is
not amortised under Mondial Assistance
Group accounting policies. Impairment
testing for goodwill is carried out at least
annually and if impairment is applicable,
it is recognised through the income
statement.
Goodwill is usually amortised under the
Swiss Code of Obligations.