Jubilee Insurance 2010 Annual Report

JUBILEE HOLDINGS
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 ST DECEMBER 2010
21
NOTES
1. General Information
Jubilee Holdings Limited is a limited liability company incorporated
and domiciled in Kenya. The address of its registered office is: Jubilee
Insurance House, Wabera Street, Nairobi, Kenya. The company has a
primary listing on the Nairobi Stock Exchange and is cross-listed on the
Uganda Securities Exchange and Tanzania.
The Company through its subsidiaries and associates (together forming
the Group) underwrites Life and non-life insurance risks, such as those
associated with death, disability, health, property and liability. The Group
also issues a diversified portfolio of investment contracts to provide
its customers with asset management solutions for their savings and
retirement needs. All these products are offered to both domestic and
foreign markets. It has operations in Kenya, Uganda, Tanzania, Burundi
and Mauritius and employs over 400 people through its subsidiaries.
The insurance business of the Group is organized into two main divisions,
short-term (general) business and long-term (life) business. Long-term
business relates to the underwriting of life risks relating to insured persons,
the issue of investment contracts and the administration of pension funds.
Short-term business relates to all other categories of insurance business
written by the Group, analysed into several sub-classes of business based
on the nature of the assumed risks.
With a view to diversifying the Group’s income base, operational
activities have been extended to include fund management, property
development and management, power generation and international fibre
optic broadband cable connectivity.
For purposes of the Kenya Companies Act reporting purposes, the
balance sheet is represented by statement of financial position while the
profit and loss account is represented by the income statement.
2. Summary of significant Accounting Policies
The principal accounting policies adopted in the preparation of
these financial statements are set out below. These policies have been
consistently applied to all years presented, unless otherwise stated.
2.1 Basis of Preparation
The financial statements are prepared in compliance with International
Financial Reporting Standards (IFRS). The measurement basis applied is
the historical cost basis, except where otherwise stated in the accounting
policies below. The financial statements are presented in Kenya Shillings
(Shs), rounded to the nearest thousand.
(i) Standards, amendments and interpretations to existing standards
effective in 2010 but not relevant
Amendments to IFRS 2: Group cash-settled share-based payment
transactions – effective 1 January 2010. The amendment clarifies the
accounting for group cash-settled share-based payment transactions.
The entity receiving the goods or services shall measure the share-based
payment transaction as equity-settled only when the awards granted
are its own equity instruments, or the entity has no obligation to settle
the share-based payment transaction. The entity settling a share-based
payment transaction when another entity in the group receives the goods
or services recognises the transaction as equity-settled only if it is settled in
its own equity instruments. In all other cases, the transaction is accounted
for as cash-settled.
IFRS 3 Business Combinations – Revised – effective 1 July 2009. The
new standard continues to apply the acquisition method to business
combinations, with some significant changes. For example, all payments
to purchase a business are to be recorded at fair value at the acquisition
date, with some contingent payments subsequently re-measured at fair
value through income. Goodwill may be calculated based on the parent’s
share of net assets or it may include goodwill related to the minority
interest. All transaction costs will be expensed.
IAS 27 Consolidated and Separate Financial Statements – Revised
– effective 1 July 2009. IAS 27 (revised) requires the effects of all
transactions with non-controlling interests to be recorded in equity if there
is no change in control. They will no longer result in goodwill or gains and
losses. The standard also specifies the accounting when control is lost.
Any remaining interest in the entity is re-measured to fair value and a gain
or loss is recognised in profit or loss.
Amendments to IAS 39 Financial Instruments: Recognition and
Measurement Eligible Hedged Items – effective 1 July 2009. The
amendment makes two significant changes. It prohibits designating
inflation as a hedgeable component of a fixed rate debt. It also prohibits
including time value in the one-sided hedged risk when designating
options as hedges.
IFRIC 17 Distributions of Non-cash Assets to Owners – effective 1 July
2009. IFRIC 17 applies to the accounting for distributions of non-cash
assets (commonly referred to as dividends in specie) to the owners of
the entity. The interpretation clarifies that: a dividend payable should
be recognised when the dividend is appropriately authorised and is
no longer at the discretion of the entity; an entity should measure the
dividend payable at the fair value of the net assets to be distributed; and
an entity should recognise the difference between the dividend paid and
the carrying amount of the net assets distributed in profit or loss.
IFRIC 18 Transfers of assets from customers - effective for periods
beginning 1 July 2009. This interpretation clarifies the requirements
of IFRSs for agreements in which an entity receives from a customer
an item of property, plant and equipment that the entity must then use
either to connect the customer to a network or to provide the customer
with ongoing access to a supply of goods or services (such as a supply
of electricity, gas or water). This interpretation does not impact on the
Group’s financial statements.
(ii) Standards, amendments and interpretations to existing standards that
are not yet effective and have not been early adopted by the Group
IAS 24 (Revised) ‘Related party disclosures’ – effective 1 January
2011. The revised standard clarifies and simplifies the definition of a
related party and removes the requirement for government-related
entities to disclose details of all transactions with the government and
other government-related entities. When the revised standard is applied,
the company will need to disclose any transactions between itself and
associates of its parent company. The Group is currently putting systems
in place to capture the necessary information. It is, therefore, not possible
at this stage to disclose the impact, if any, of the revised standard on the
related party disclosures.
Classification of rights issues’ (amendment to IAS 32) – effective 1
February 2010. The amendment addresses the accounting for rights
issues that are denominated in a currency other than the functional
currency of the issuer. Provided certain conditions are met, such
rights issues are now classified as equity regardless of the currency in
which the exercise price is denominated. Previously, these issues had
to be accounted for as derivative liabilities. The amendment applies
retrospectively in accordance with IAS 8 ‘Accounting policies, changes
in accounting estimates and errors’. This amendment is not expected to
have any impact on the Group’s financial statements.
IFRIC 19, ‘Extinguishing financial liabilities with equity instruments’ -
effective 1 July 2010. The interpretation clarifies the accounting by
an entity when the terms of a financial liability are renegotiated and
result in the entity issuing equity instruments to a creditor of the entity
to extinguish all or part of the financial liability (debt for equity swap).
It requires a gain or loss to be recognised in profit or loss, which is
measured as the difference between the carrying amount of the financial
liability and the fair value of the equity instruments issued. If the fair
value of the equity instruments issued cannot be reliably measured, the
equity instruments should be measured to reflect the fair value of the
financial liability extinguished. It is not expected to have any impact on
the Group’s financial statements.
JUBILEE HOLDINGS