Annual Report 2010 - Hannover Re

Deferred tax liabilities: in accordance with IAS 12 “Income
Taxes” deferred tax liabilities must be recognised if assets
are to be recognised in a higher amount or liabilities in a
lower amount in the consolidated balance sheet than in the tax
balance sheet and if these temporary differences will lead to
additional tax loads in the future; please see our explanatory
remarks on deferred tax assets.
Long-term liabilities principally consist of subordinated debts
that can only be satisfied after the claims of other creditors
in the event of liquidation or bankruptcy. They are measured
at amortised cost. Liabilities to holders of minority shares in
partnerships arising out of long-term capital commitments are
measured at the fair value of the redemption amount as at the
balance sheet date.
Financial liabilities at fair value through profit or loss: Hannover
Re does not make use of the fair value option provided
by IAS 39 “Financial Instruments: Recognition and Measurement”
to classify financial liabilities in this category upon firsttime
recognition.
Shareholders‘ equity: the items “common shares” and “additional
paid-in capital” are comprised of the amounts paid in
by the parent company‘s shareholders on its shares. In addition
to the statutory reserves of the parent company and the
allocations from net income, the retained earnings consist of
reinvested profits generated by the Hannover Re Group companies
in previous periods. What is more, in the event of a
retrospective change of accounting policies, the adjustment
for previous periods is recognised in the opening balance
sheet value of the retained earnings and comparable items of
the earliest reported period. Unrealised gains and losses from
the fair value measurement of financial instruments held as
available for sale are carried in cumulative other comprehensive
income under unrealised gains and losses on investments.
Translation differences resulting from the currency translation
of separate financial statements of foreign subsidiaries are
recognised under gains and losses from currency translation.
Minority interests are shares in the equity of affiliated companies
not held by companies belonging to the Group. IAS 1
“Presentation of Financial Statements” requires that minority
interests be recognised separately within Group shareholders‘
equity. The minority interest in profit or loss is shown
separately as profit appropriation following the net income
(“thereof” note). This item refers mainly to minority interests
in E+S Rück.
Disclosures about financial instruments: IFRS 7 “Financial
Instruments: Disclosures” requires more extensive disclosures
according to classes of financial instruments. In this context,
the term “class” refers to the classification of financial instruments
according to their risk characteristics. A minimum distinction
is required here between measurement at amortised
cost or at fair value. A more extensive or divergent distinction
should, however, be geared to the purpose of the corresponding
disclosures in the notes. In contrast, the term “category”
is used within the meaning of the measurement categories
defined in IAS 39 “Financial Instruments: Recognition and
Measurement” (held to maturity, loans and receivables, available
for sale and financial assets at fair value through profit or
loss with the subcategories of trading and designated financial
instruments). Essentially, the following classes of financial instruments
are established:
• Fixed-income securities
• Equities, equity funds and other variable-yield securities
• Other financial assets – at fair value through profit or loss
• Other invested assets
• Short-term investments
• Funds withheld and contract deposits (assets)
• Accounts receivable
• Other receivables
• Funds withheld and contract deposits (liabilities)
• Other liabilities
• Long-term debt
• Subordinated debt
• Other long-term liabilities
This grouping into classes is not, however, solely determinative
for the type and structure of each disclosure in the notes.
Rather, guided by the underlying business model of reinsurance,
the disclosures are made on the basis of the facts and
circumstances existing in the financial year and in light of the
principle of materiality.
Currency translation: financial statements of Group subsidiaries
were drawn up in the currencies corresponding to the
economic environment in which each subsidiary primarily
operates. These currencies are referred to as functional currencies.
The euro is the reporting currency in which the consolidated
financial statement is prepared.
Transactions in foreign currencies reported in Group com -
p anies’ individual financial statements are converted into the
functional currency at the transaction rate. In accordance
with IAS 21 “The Effects of Changes in Foreign Exchange
Rates” the recognition of exchange differences on translation
is guided by the nature of the underlying balance sheet item.
Exchange differences from the translation of monetary assets
and liabilities are recognised directly in the statement of in-
120 NOTES 3.2 Summary of major accounting policies
Hannover Re Group annual report 2010