FINANCIAL STATEMENTS
STRATEGIC REPORT
GOVERNANCE
1 SIGNIFICANT ACCOUNTING POLICIES continued 1.14 Intangible assets continued
For intangible assets with finite useful lives, impairment testing is performed where there is an indication that the carrying value of the assets may be subject to an impairment. An impairment loss is recognised where the carrying value of an intangible asset exceeds its recoverable amount. The significant intangible assets recognised by the Group, their useful economic lives and the methods used to determine the cost of intangibles acquired in a business combination are as follows:
Intangible asset
Estimated useful economic life
Valuation method
PVIF
Up to 16 years 12 – 15 years
Estimated value in-force using European embedded value model
Intellectual property
Estimated replacement cost
The useful economic lives of intangible assets recognised by the Group other than those acquired in a business combination are as follows:
Intangible asset
Estimated useful economic life
PrognoSys™
12 years 3 years
Software
1.15 Property, plant and equipment Land and buildings are measured at their revalued amounts less subsequent depreciation, and impairment losses are recognised at the date of revaluation. Valuations are performed with sufficient frequency to ensure that the fair value of the revalued asset does not differ materially from its carrying value. A revaluation surplus is recognised in other comprehensive income and credited to the revaluation reserve in equity. However, to the extent that it reverses a revaluation deficit of the same asset previously recognised in profit or loss, the increase is recognised in profit or loss. A revaluation deficit is recognised in profit or loss, except to the extent that it offsets an existing surplus on the same asset recognised in the revaluation reserve.
Buildings are depreciated on a straight-line basis over the estimated useful lives of the buildings of 25 years.
Equipment is stated at cost less accumulated depreciation and impairment losses. Depreciation is calculated on a straight-line basis to write down the cost to residual value over the estimated useful lives as follows:
Plant and equipment
Estimated useful economic life
Computer equipment Furniture and fittings
3 – 4 years 2 – 10 years
1.16 Investment property Investment property includes property that is held to earn rentals or for capital appreciation or both. 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 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 an 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. 1.17 Financial investments Classification The Group classifies financial investments in accordance with IAS 39 whereby, subject to specific criteria, they are accounted for at fair value through profit and loss. This comprises assets designated by management as fair value through profit or loss on inception, as they are managed on a fair value basis, and derivatives that are classified as held for trading. These investments are measured at fair value with all changes thereon being recognised in investment income in the Consolidated statement of comprehensive income. Derivatives are recognised at fair value through profit or loss. 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. 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. Amounts payable or receivable on unsettled purchases or sales are recognised in other payables or other receivables respectively. Transaction costs are expensed through profit or loss.
Loans secured by residential mortgages, “LTMs”, are recognised when cash is advanced to borrowers.
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