Annual Report 2012 - Swiss Life

127 Consolidated Financial Statements
claims and administrative expenses, anticipated changes to future life policyholder benefit liabilities
and expected annual policyholder bonuses.
Deferred acquisition costs for other traditional life insurance contracts and annuities with life contingencies
are amortised in proportion to the expected premiums.
Deferred acquisition costs for investment-type contracts such as universal life contracts are amortised
over the life of the contract based on the present value of the estimated gross profits or gross margins
expected to be realised. The estimated gross profits are made up of margins available from mortality
charges and contract-administration costs, investment earnings spreads, surrender charges and other
expected assessments and credits.
When DAC is amortised in proportion to gross profits or gross margins on the acquired contracts,
realised gains/ losses are taken into account as well as gains/losses recognised directly in equity
(unrealised gains/losses). If these gains/losses were to be realised, the gross profits or gross margins
used to amortise DAC would be affected. Therefore, an adjustment relating to these unrealised gains/
losses is recognised in equity and is also reflected in the amount of DAC in the balance sheet (“shadow
accounting”).
Assumptions used to estimate the future value of expected gross margins and profits are evaluated
regularly and adjusted if estimates change. Deviations of actual results from estimated experience are
reflected in income.
For short-duration contracts acquisition costs are amortised over the period in which the related
premiums written are earned, in proportion to premium revenue.
Deferred origination costs (DOC)
Incremental costs directly attributable to securing rights to receive fees for asset management services
sold with investment contracts without DPF are recognised as an asset if they can be identified separately
and measured reliably and if it is probable that they will be recovered. These incremental costs are
costs that would not have been incurred if the Group had not secured the investment contracts. All
other origination costs are recognised as an expense when incurred.
Deferred origination costs are generally amortised on a straight-line basis over the life of the contracts.
Goodwill
The Group’s acquisitions of other companies are accounted for under the acquisition method. Goodwill
acquired prior to 1995 was charged directly to equity.
Goodwill represents the excess of the fair value of the consideration transferred and the amount of
any non-controlling interest recognised, if applicable, over the fair value of the assets and liabilities
recognised at the date of acquisition. The Group has the option for each business combination, in
which control is achieved without buying all of the equity of the acquiree, to recognise 100% of the
goodwill in business combinations, not just the acquirer’s portion of the goodwill (“full goodwill
method”). Goodwill on acquisitions of subsidiaries is included in intangible assets. Acquisitionrelated
costs are expensed. Goodwill on associates is included in the carrying amount of the investment.
Swiss Life – Annual Report 2012