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The Group KD Group Annual Report 2009
Notes to Consolidated Financial Statements as at and for the year ended 31 December 2009
2.11 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet only when there is a legally
enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and
settle the liability simultaneously.
2.12 Cash and cash equivalents
Cash and cash equivalents include cash in hand and demand deposits held with banks. The Group reports cash flows from
operating activities using the indirect method, whereby profit or loss is restated for the effects of transactions of a non-cash
nature, any deferrals or accruals of past or future operating cash receipts or payments, and items of income or expense
associated with investing or financing cash flows.
2.13 Share capital and dividend distribution
Ordinary and preference shares are equity. Incremental costs directly attributable to the issue of new shares or options or to
the acquisition of a business are shown in equity as a deduction, net of tax, from the proceeds.
Where the Company or another member of the Group purchases the Company's equity share capital, the consideration paid
is deducted from total shareholders’ equity. Where such shares are subsequently sold or reissued, any consideration received
is included in the shareholders’ equity.
Dividends on ordinary and preference shares are recognised as a liability in the period in which they are approved by the
Company's shareholders. Dividends for the year that are declared after the balance sheet date and before the financial
statements are authorised for issue are disclosed in the subsequent events note (see Note 30).
2.14 Insurance and investment contracts
The Group issues contracts that transfer insurance risk or financial risk, or both. Insurance contracts are those contracts that
transfer significant insurance risk. Such contracts may also transfer financial risk. As a general guideline, the Group defines
as significant insurance risk the possibility of having to pay benefits on the occurrence of an insured event that are at least
10% above the benefits payable if the insured event did not occur.
Investment contracts are those contracts that transfer financial risk with no significant insurance risk.
Traditional life insurance contracts and investment contracts include the possibility of discretionary participation in the positive
result realised through management of assets from said contracts (hereinafter: DPF). The possibility of discretionary
participation is a contractual right to additional benefits supplementary to guaranteed benefits, namely:
- benefits which are likely to represent a significant share of the total contract benefits;
- benefits whose amount or time frame is specified by the insurer; and
- benefits which are contractually based on:
• the success of a given category of contracts or certain types of contracts;
• realised and/or unrealised investment returns on a specific pool of assets held by the issuer; or
• the profit of the company, cover of assurance or other entity that issues the contract.
Traditional life insurance contracts with DPF and investment contracts with DPF contain an agreed insurance sum or annuity
(calculated under the premise of achieving a certain rate of return on accumulated assets) and an additional possibility of the
insured’s participation in the Group’s realised profits in the segments of life insurance and annuity insurance at the end of the
financial period and/or with regard to the profitability of assets if higher than the pre-calculated amounts. The basis for
determining the amounts of discretionary participation of the insured and the percentage vary between individual insurance
products and are defined in the insurance terms.
Insurance and financial life insurance contracts are defined as contracts with DPF because the interest rate used at the time
of preparing the product and calculating the agreed insurance sum or annuity was lower than the expectations at the time with
regard to commercial interest rates. Additional benefits for the policyholder were expected at the stage of preparing the
insurance product, which represents a discretionary right to additional benefits.
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