152 | Just Group PLC | Annual Report and Accounts 2024
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
1. MATERIAL ACCOUNTING POLICIES continued The useful lives over which depreciation is charged for all categories of property and equipment are as follows:
Property and equipment
Estimated useful economic life
Land
Indefinite – Land is not depreciated
Buildings
25 years 3–4 years 2–10 years
Computer equipment Furniture and fittings
1.12. Investment property Investment property includes property that is held to earn rentals and/or for capital appreciation. Investment property is initially recognised at cost, including any directly attributable transaction costs and subsequently measured at fair value. Fair value is the price that would be received to sell a property in an orderly transaction between market participants at the measurement date. The subsequent measurement of fair value reflects, among other things, rental income from current leases and other assumptions that market participants would use when pricing investment property under current market conditions. Gains and losses arising from the change in fair value are recognised as income or expense in the Consolidated statement of comprehensive income. Where investment property is leased out by the Group, rental income from these operating leases is recognised as income in the Consolidated statement of comprehensive income on a straight-line basis over the period of the lease. 1.13. Financial investments 1.13.1. Classification of financial assets and financial liabilities The Group classifies its financial assets into either the Amortised Cost or FVTPL measurement categories. The Group measures its financial assets according to the business model applied. This reflects how the Group manages financial assets either in order to solely collect the contractual cash flows from assets (measured at amortised cost), or collect both the contractual cash flows and cash flows arising from the sale of assets (measured at FVTPL). Business model – measurement of financial investments at FVTPL Financial investments which back the net insurance fulfilment cash flows are classified as part of the fair value business model and measured at FVTPL. Factors considered by the Group in determining the business model for a group of assets include past experience on how the cash flows for these assets were collected, how the asset’s performance is evaluated and reported to key management personnel, how risks are assessed and managed, and how managers are compensated. To ensure that the contractual cash flows from the financial assets are sufficient to settle those liabilities, the Group undertakes significant buying and selling activity on a regular basis to rebalance its portfolio of assets and to meet cash flow needs as they arise. Investments are measured at fair value with any gains and losses recognised in Investment return in the Consolidated statement of comprehensive income. Transaction costs are recognised in Other operating expenses when incurred. The Groups’ investments in Lifetime Mortgages, which contain No Negative Equity Guarantees, are included in financial investments mandatorily measured at FVTPL as the cash flows do not represent the solely payments of principal and interest (“SPPI”). Derivative instruments All derivative instruments, both assets and liabilities are classified as FVTPL in accordance with IFRS 9 as they are held for trading. All derivatives are carried as assets when the fair value is positive and liabilities when the fair values are negative. The Group does not use hedge accounting. Amortised cost The Group has classified bank balances and other receivables at amortised cost. These financial assets are eligible for this measurement as they contain payments of solely payments of principal and interest and are not held for trading purposes. In addition, the Group has a distinct portfolio of UK Government bonds (“Gilts”) held in a business model to collect cash flows that represent solely payments of principal and interest. This portfolio is managed separately from the assets that are held to back the insurance contracts, and the Group expects to hold these assets through to maturity. The Group has policies and procedures which define the framework for when disposals of these Gilts can occur, which is expected to be in extreme market conditions for risk management purposes. Transaction costs incurred on financial assets measured at amortised cost are capitalised to the underlying instrument and are included in the determination of the effective rate of interest. 1.13.2. Recognition and derecognition Regular-way purchases and sales of investments are recognised on the trade date, which is the date that the Group commits to purchase or sell the assets. For purchases of new illiquid investments the Group commits to purchase the assets where there is unconditional agreement made by both parties. Amounts payable or receivable on unsettled purchases or sales are recognised in other payables or other receivables respectively. Forward contracts to enter into investments at a contracted date some time in the future are not recognised until the settlement date; prior to that a derivative forward contract is recognised. LTMs are recognised when cash is advanced to borrowers.
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