Aviva 2007 Annual Report Download - page 124
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Please find page 124 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.Intangible assets
Intangibles consist primarily of brands, certain of which
have been assessed as having indefinite useful lives, and
contractual relationships such as access to distribution
networks and customer lists. The economic lives of the
latter are determined by considering relevant factors such
as usage of the asset, typical product life cycles, potential
obsolescence, maintenance costs, the stability of the
industry, competitive position, and the period of control
over the assets. These intangibles are amortised over their
useful lives, which range from five to 22 years, using the
straight-line method.
The amortisation charge for the year is included in the
income statement under “Other operating expenses”.
For intangibles with finite lives, a provision for impairment
will be charged where evidence of such impairment is
observed. Intangibles with indefinite lives are subject to
regular impairment testing, as described below.
Impairment testing
For impairment testing, goodwill and intangibles with
indefinite useful lives have been allocated to cash-
generating units by geographical reporting unit and
business segment. The carrying amount of goodwill and
intangible assets with indefinite useful lives is reviewed at
least annually or when circumstances or events indicate
there may be uncertainty over this value. Goodwill and
indefinite life intangibles are written down for impairment
where the recoverable amount is insufficient to support its
carrying value. Further details on goodwill allocation and
impairment testing are given in note 16(b).
(O) Property and equipment
Owner-occupied properties are carried at their revalued
amounts, which are supported by market evidence, and
movements are taken to a separate reserve within equity.
When such properties are sold, the accumulated
revaluation surpluses are transferred from this reserve to
retained earnings. These properties are depreciated down
to their estimated residual values over their useful lives.
All other items classed as property and equipment within
the balance sheet are carried at historical cost less
accumulated depreciation.
Investment properties under construction are included
within property and equipment until completion, and
are stated at cost less any provision for impairment in their
values.
Depreciation is calculated on the straight-line method to
write down the cost of other assets to their residual values
over their estimated useful lives as follows:
– Land No depreciation
– Properties under construction No depreciation
– Owner-occupied properties 25 years
– Motor vehicles Three years,
or lease term if longer
– Computer equipment Three to five years
– Other assets Three to five years
The assets’ residual values, useful lives and method of
depreciation are reviewed regularly, and at least at each
financial year end, and adjusted if appropriate. Where the
carrying amount of an asset is greater than its estimated
recoverable amount, it is written down immediately to its
recoverable amount. Gains and losses on disposal of
property and equipment are determined by reference to
their carrying amount.
All borrowing costs and repairs and maintenance costs
are charged to the income statement during the financial
period in which they are incurred. The cost of major
renovations is included in the carrying amount of the asset
when it is probable that future economic benefits in excess
of the most recently assessed standard of performance of
the existing asset will flow to the Group and the
renovation replaces an identifiable part of the asset. Major
renovations are depreciated over the remaining useful life
of the related asset.
(P) Investment property
Investment property is held for long-term rental yields
and is not occupied by the Group. Completed investment
property is stated at its fair value, which is supported by
market evidence, as assessed by qualified external valuers
or by local qualified staff of the Group in overseas
operations. Changes in fair values are recorded in the
income statement in net investment income.
(Q) Impairment of non-financial assets
Property and equipment and other non-financial assets
are reviewed for impairment losses whenever events or
changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss is
recognised for the amount by which the carrying amount
of the asset exceeds its recoverable amount, which is the
higher of an asset’s net selling price and value in use.
For the purposes of assessing impairment, assets are
grouped at the lowest level for which there are separately
identifiable cash flows.
(R) Derecognition and offset of
financial assets and financial liabilities
A financial asset (or, where applicable, a part of a financial
asset or part of a group of similar financial assets) is
derecognised where:
– The rights to receive cash flows from the asset
have expired;
– The Group retains the right to receive cash flows from
the asset, but has assumed an obligation to pay them
in full without material delay to a third-party under a
“pass-through” arrangement; or
– The Group has transferred its rights to receive cash
flows from the asset and has either transferred
substantially all the risks and rewards of the asset, or has
neither transferred nor retained substantially all the risks
and rewards of the asset, but has transferred control of
the asset.
A financial liability is derecognised when the obligation
under the liability is discharged or cancelled or expires.
Aviva plc
Annual Report and
Accounts 2007
120
Financial
statements
Accounting policies continued