Annual Report 2012 - Swiss Life

130 Consolidated Financial Statements
between the proceeds (net of transaction costs) and the redemption value is recognised in the income
statement over the period of the borrowings.
Based on the terms and conditions, such as repayment provisions and contractual interest payments,
hybrid instruments are considered as financial liabilities.
Debt instruments with embedded conversion options to a fixed number of shares of the Group are
separated into a debt and an equity component. The difference between the proceeds and fair value
of the debt at issuance is recorded in equity. The fair value of the debt at issuance is determined using
a market interest rate for similar instruments with no conversion rights. The Group does not recognise
any change in the value of these options in subsequent reporting periods.
Borrowing costs presented in the consolidated statement of income relate to the interest expense on
the financial liabilities classified as borrowings whilst interest expense presented in the consolidated
statement of income relates to interest expense on bank deposits, insurance and investment contract
deposits and repurchase agreements.
Other Financial Liabilities
For deposits with fixed and guaranteed terms the amortised cost basis is used. Initial recognition is
at the proceeds received, net of transaction costs incurred. Subsequently, they are stated at amortised
cost using the effective interest method. Any difference between the proceeds (net of transaction
costs) and the redemption value is recognised in the income statement over the period of the deposits.
For repurchase agreements, initial recognition is at the amount of cash received, net of transaction
costs incurred. Subsequently, the difference between the amount of cash initially received and the
amount of cash exchanged upon maturity is amortised over the life of the agreement using the effective
interest method.
2.20 Employee benefits
Post-employment benefits
The Swiss Life Group provides post-employment benefits under two types of arrangement: defined
benefit plans and defined contribution plans.
The assets of these plans are generally held separately from the Group’s general assets in trusteeadministered
funds. Defined benefit plan contributions are based upon regulatory requirements
and/or plan terms. The Group’s defined benefit obligations and the related service costs are determined
at each balance sheet date by a qualified actuary, using the Projected Unit Credit Method.
The amount recognised in the balance sheet represents the present value of the defined benefit obligations,
reduced by the fair value of plan assets and adjusted for unrecognised actuarial gains and
losses and unrecognised past ser vice costs. The recognition of a resulting asset is limited to the total
of any cumulative unrecognised net actuarial losses and past service costs and the present value of
any future refunds from the plans or reductions in future contributions to the plans.
Unrecognised actuarial gains and losses which exceed 10% of the greater of the present value of the
defined benefit obligations and the fair value of plan assets at the end of the previous reporting period
are recognised in profit or loss over the expected average remaining working lives of the employees
participating in the plans.
Swiss Life – Annual Report 2012