Aviva 2009 Annual Report Download - page 144

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Aviva plc Accounting policies continued
Annual Report and Accounts 2009
(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 except
where they are directly attributable to the acquisition or construction of property and equipment as described in policy O above.
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 and disclosed where material.
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 weighted 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
statement of financial position. The relevant assets are recorded at the lower of their carrying amount and their fair value, less the
estimated selling costs.