123
FINANCIAL STATEMENTS
1 SIGNIFICANT ACCOUNTING POLICIES continued 1.23 Investment contract liabilities
Investment contracts are measured at fair value through profit or loss in accordance with IAS 39. The fair value of investment contracts is estimated using an internal model and determined on a policy-by-policy basis using a prospective valuation of future Retirement Income benefit and expense cash flows. 1.24 Loans and borrowings Loans and borrowings are initially recognised at fair value, net of transaction costs, and subsequently amortised through profit or loss over the period to maturity at the effective rate of interest required to recognise the discounted estimated cash flows to maturity. 1.25 Other provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. The amount recorded as a provision is the best estimate of the expenditure required to settle the obligation at the balance sheet date. Where the effect of the time value of money is material, the provision is the present value of the expected expenditure. 1.26 Taxation The current tax expense is based on the taxable profits for the year, using tax rates substantively enacted at the Consolidated statement of financial position date, and after any adjustments in respect of prior years. Tax, including tax relief for losses if applicable, is allocated over profits before taxation and amounts charged or credited to components of other comprehensive income and equity as appropriate. Provision is made for deferred tax liabilities, or credit taken for deferred tax assets, using the liability method, on all material temporary differences between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. The principal temporary differences arise from the revaluation of certain financial assets and liabilities, including technical provisions and other insurance items and tax losses carried forward, and include amortised transitional tax adjustments resulting from changes in tax basis. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
2 NET INVESTMENT INCOME
Year ended 31 December 2019 £m
Year ended 31 December 2018 £m
Interest income: Assets at fair value through profit or loss
663.0
655.2
Movement in fair value: Financial assets and liabilities designated on initial recognition at fair value through profit or loss
658.8 129.9
(447.3) (65.3)
Derivative financial instruments (note 27)
Total net investment income
1,451.7
142.6
3 ACQUISITION COSTS
Year ended 31 December 2019 £m
Year ended 31 December 2018 £m
14.8 20.4 35.2
Commission
19.2 33.2 52.4
Other acquisition expenses Total acquisition costs
4 OTHER OPERATING EXPENSES
Year ended 31 December 2019 £m
Year ended 31 December 2018 £m
108.0
Personnel costs (note 9)
118.7
13.9
Investment expenses and charges
16.3
4.5
Depreciation of equipment
1.4 2.4
–
Operating lease rentals: land and buildings
19.9
Amortisation of intangible assets
24.7
4.0
Impairment of property, plant and equipment
–
77.5
Other costs
91.3
Total other operating expenses
227.8
254.8
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