Annual Report 2012 - Swiss Life

120 Consolidated Financial Statements
the property is measured at cost until either its fair value becomes reliably measurable or construction
is completed.
Investment property being redeveloped for continuing use as investment property, or for which the
market has become less active, continues to be measured at fair value.
If an item of property and equipment becomes an investment property because its use has changed,
the positive difference resulting between the carrying amount and the fair value of this item at the
date of transfer is recognised in equity as a revaluation surplus. However, if a fair value gain reverses
a previous impairment loss, the gain is recognised in the income statement. Any resulting decrease in
the carrying amount of the property is recognised in net profit or loss for the period. Upon the disposal
of such investment property, any surplus previously recorded in equity is transferred to retained
earnings; the transfer is not made through income.
If an investment property becomes owner-occupied, it is reclassified as property and equipment, and
its fair value at the date of reclassification becomes its cost for subsequent accounting purposes.
2.10 Insurance operations
Definition of insurance contracts
Insurance contracts are contracts under which one party accepts significant insurance risk from
another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain
future event adversely affects the policyholder. Significant insurance risk exists if an insured event
could cause an insurer to pay significant additional benefits in any scenario, excluding scenarios that
lack commercial substance (i.e. have no discernible effect on the economics of the transaction). The
classification of contracts identifies both the insurance contracts that the Group issues and reinsurance
contracts that the Group holds. As a Group policy, Swiss Life considers those contracts to be
insurance contracts that require the payment of additional benefits in excess of 10% of the benefits
that would be payable if the insured event had not occurred, excluding scenarios that lack commercial
substance.
The Group has assessed the significance of insurance risk on a contract-by-contract basis. Contracts
that do not transfer insurance risk at inception but that transfer insurance risk at a later date are
classified as insurance from inception unless the Group remains free to price the insurance premium
at a later date. In this case, the contract is classified as insurance when the insurance premiums are
specified. A contract that qualifies as an insurance contract remains an insurance contract until all
rights and obligations are extinguished or expire.
Contracts under which the transfer of insurance risk to the Group from the policyholder is not significant
are classified as investment contracts.
Investment contracts with and without discretionary participation features
For investment contracts that contain discretionary participation features (see below) the same recognition
and measurement principles as for insurance contracts apply. For investment contracts without
discretionary participation features the recognition and measurement rules for financial instruments
apply.
Swiss Life – Annual Report 2012