Aviva 2007 Annual Report Download - page 118
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Please find page 118 of the 2007 Aviva annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Aviva plc (the “Company”), a public limited company
incorporated and domiciled in the United Kingdom (UK),
together with its subsidiaries (collectively, the “Group” or
“Aviva”) transacts life assurance and long-term savings
business, fund management, and most classes of general
insurance and health business through its subsidiaries,
associates and branches in the UK, Ireland, continental
Europe, United States (US), Canada, Asia, Australia and
other countries throughout the world. The Group also
invests in securities, properties, mortgages and loans and
carries on the business of trading in property.
The Group is managed using reportable segments based
on the above activities. These are long-term business, fund
management, general insurance and health, further details
of which are given in note 4.
The principal accounting policies adopted in the preparation
of these financial statements are set out below.
(A) Basis of presentation
Since 2005, all European Union listed companies have
been required to prepare consolidated financial statements
using International Financial Reporting Standards (IFRS)
issued by the International Accounting Standards Board
(IASB) and endorsed by the European Union (EU). The date
of transition to IFRS was 1 January 2004. In addition to
fulfilling their legal obligation to comply with IFRS as
adopted by the European Union, the Group and Company
have also complied with IFRS as issued by the International
Accounting Standards Board and applicable at
31 December 2007.
In November 2006, the IASB issued IFRS 8, Operating
Segments, the requirements of which are applicable for
accounting periods beginning on or after 1 January 2009.
On adoption, it will result in amendments to the disclosure
of our segmental results but will have no impact on the
results overall. The IASB also issued IAS 1, Presentation of
Financial Statements: A Revised Presentation, and an
amendment to IAS 23, Borrowing Costs, during 2007,
neither of which has yet been endorsed by the EU.
These are not applicable for the current accounting period
and, on adoption, they will not have any material impact
on the Group’s financial reporting.
Since the year end, the IASB has issued a revised version of
IFRS 3, Business Combinations, and an amendment to IAS
27, Consolidated and Separate Financial Statements,
which are applicable to accounting periods beginning on
or after 1 July 2009, and amendments to IAS 1,
Presentation of Financial Instruments, IAS 32, Financial
Instruments: Presentation, and IFRS 2, Share-Based
Payments: Vesting Conditions and Cancellations, which are
applicable to accounting periods beginning on or after
1 January 2009. None of these has yet been endorsed by
the EU and, on adoption, will not have any material
impact on the Group’s financial reporting.
IFRIC interpretation 11, IFRS 2 –Group and Treasury Share
Transactions, and interpretation 12, Service Concession
Agreements, were issued during 2006 but neither of them
is applicable for the current accounting period. In addition,
IFRIC interpretation 13, Customer Loyalty Programmes and
IFRIC interpretation 14, IAS 19 –The Limit on a Defined
Benefit Asset, Minimum Funding Requirements and their
Interaction, have been issued during 2007. They have not
yet been endorsed by the EU but neither of them is
applicable for the current accounting period. On adoption,
none of these interpretations will have any impact on the
Group’s financial reporting.
In accordance with Phase I IFRS 4, Insurance Contracts,
the Group has applied existing accounting practices for
insurance and participating investment contracts, modified
as appropriate to comply with the IFRS framework and
applicable standards. Further details are given in policy F
below.
Items included in the financial statements of each of
the Group’s entities are measured in the currency of the
primary economic environment in which that entity
operates (the functional currency). The consolidated
financial statements are stated in sterling, which is the
Company’s functional and presentation currency. Unless
otherwise noted, the amounts shown in these financial
statements are in millions of pounds sterling (£m).
As supplementary information, consolidated financial
information is also presented in euros.
The separate financial statements of the Company are on
pages 236 to 243.
FRS 27
Financial Reporting Standard 27, Life Assurance, (FRS 27)
was issued by the UK’s Accounting Standards Board (ASB)
on 13 December 2004, following the Penrose inquiry.
Aviva, along with other major insurance companies and
the Association of British Insurers (ABI), signed a
Memorandum of Understanding (MoU) with the ASB
relating to FRS 27. Under this MoU, Aviva voluntarily
agreed to adopt in full the standard from 2005 in the
Group’s IFRS financial statements.
(B) Operating profit
The long-term nature of much of the Group’s operations
means that, for management’s decision-making and
internal performance management, short-term realised
and unrealised investment gains and losses are treated as
non-operating items. The Group focuses instead on an
operating profit measure that incorporates an expected
return on investments supporting its long-term business,
general insurance and health business. Operating profit
for long-term business is based on expected investment
returns on financial investments backing shareholder and
policyholder funds over the reporting period, with
allowance for the corresponding expected movements
in liabilities. Variances between actual and expected
investment returns, and the impact of changes in
economic assumptions on liabilities, are disclosed
separately outside operating profit. For general insurance
and health business, the total investment income,
including realised and unrealised gains, is analysed
between that calculated using a longer term return and
short-term fluctuations from this. Further details of this
analysis and the assumptions used are given in notes 8
and 9.
Aviva plc
Annual Report and
Accounts 2007
114
Financial
statements
Accounting policies