Aviva 2007 Annual Report Download - page 129
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Please find page 129 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.Deferred tax related to fair value re-measurement of
available for sale investments, owner-occupied properties
and other amounts taken directly to equity is recognised in
the balance sheet as a deferred tax asset or liability. In
addition to paying tax on shareholders’ profits, the Group’s
life businesses in the UK, Ireland and Australia pay tax on
policyholders’ investment returns (“policyholder tax”) on
certain products at policyholder tax rates. Policyholder tax
is accounted for as an income tax and is included in the
total tax expense.
The Group has decided to show separately the amounts of
policyholder tax to provide a more meaningful measure of
the tax the Group pays on its profits. In the pro forma
reconciliations, operating profit has been calculated after
charging policyholder tax.
(AC) Borrowings
Borrowings are recognised initially at their issue proceeds
less transaction costs incurred. Subsequently, most
borrowings are stated at amortised cost, and any difference
between net proceeds and the redemption value is
recognised in the income statement over the period of
the borrowings using the effective interest rate method.
All borrowing costs are expensed as they are incurred.
Where loan notes have been issued in connection with
certain securitised mortgage loans, the Group has taken
advantage of the revised fair value option under IAS 39 to
present the mortgages, associated liabilities and derivative
financial instruments at fair value, since they are managed
as a portfolio on a fair value basis. This presentation
provides more relevant information and eliminates any
accounting mismatch which would otherwise arise from
using different measurement bases for these three items.
(AD) Share capital and treasury shares
Equity instruments
An equity instrument is a contract that evidences a residual
interest in the assets of an entity after deducting all its
liabilities. Accordingly, a financial instrument is treated as
equity if:
(i) there is no contractual obligation to deliver cash or
other financial assets or to exchange financial assets or
liabilities on terms that may be unfavourable; and
(ii) the instrument is a non-derivative that contains no
contractual obligation to deliver a variable number of
shares or is a derivative that will be settled only by the
Group exchanging a fixed amount of cash or other assets
for a fixed number of the Group’s own equity instruments.
Share issue costs
Incremental external costs directly attributable to the issue
of new shares are shown in equity as a deduction, net of
tax, from the proceeds of the issue.
Dividends
Interim dividends on ordinary shares are recognised in
equity in the period in which they are paid. Final dividends
on these shares are recognised when they have been
approved by shareholders. Dividends on preference shares
are recognised in the period in which they are declared
and appropriately approved.
Treasury shares
Where the Company or its subsidiaries purchase the
Company’s share capital or obtain rights to purchase its
share capital, the consideration paid (including any
attributable transaction costs net of income taxes) is
shown as a deduction from total shareholders’ equity.
Gains and losses on sales of own shares are charged
or credited to the treasury share account in equity.
(AE) Fiduciary activities
Assets and income arising from fiduciary activities,
together with related undertakings to return such assets
to customers, are excluded from these financial statements
where the Group has no contractual rights in the assets
and acts in a fiduciary capacity such as nominee, trustee
or agent.
(AF) Earnings per share
Basic earnings per share is calculated by dividing net
income available to ordinary shareholders by the weighted
average number of ordinary shares in issue during the
year, excluding the average number of ordinary shares
purchased by the Group and held as treasury shares.
Earnings per share has also been calculated on the
operating profit before impairment of goodwill and other
adjusting items, after tax, attributable to ordinary
shareholders, as the directors believe this figure provides
a better indication of operating performance. Details are
given in note 14.
For the diluted earnings per share, the weighted average
number of ordinary shares in issue is adjusted to assume
conversion of all dilutive potential ordinary shares, such as
convertible debt and share options granted to employees.
Potential or contingent share issuances are treated as
dilutive when their conversion to shares would decrease
net earnings per share.
(AG) Operations held for sale
Assets and liabilities held for disposal as part of operations
which are held for sale are shown separately in the
consolidated balance sheet. The relevant assets are
recorded at the lower of their carrying amount and their
fair value, less the estimated selling costs.
Aviva plc
Annual Report and
Accounts 2007
125
Financial
statements