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<strong>CIC</strong> INSURANCE GROUP LIMITEDNotes to the Financial Statements continuedFor the year ended 31 December 20111 ACCOUNTING POLICIES (Continued)Adoption of new and revised International Financial Reporting Standards (IFRSs) and Interpretations (IFRIC) (Continued)(c)Early adoption of standards (Continued)Available-for-sale financial assetsAvailable-for-sale financial assets are non-derivative financial assets that are either designated in this category ornot classified in any of the other categories.Purchases and sales of investments are recognised on trade date – the date on which the group commits topurchase or sell the asset. Investments are initially recognised at fair value plus, in the case of all financial assetsor financial liabilities not carried at fair value through profit or loss, transaction costs that are directly attributable totheir acquisition. Investments are derecognised when the rights to receive cash flows from the investments haveexpired or where they have been transferred and the group has also transferred substantially all risks and rewardsof ownership.Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carriedat fair value. Loans and receivables and held-to-maturity financial assets are carried at amortised cost using theeffective interest method. Realised and unrealised gains and losses arising from changes in the fair value of the‘financial assets at fair value through profit or loss’ category are included in profit or loss in the year in which theyarise. Unrealised gains and losses arising from changes in the fair value of non-monetary securities classified asavailable-for-sale are recognised in other comprehensive income and accumulated under the heading of fair valuereserve in equity. When securities classified as available-for-sale are sold or impaired, the accumulated fair valueadjustments are included in profit or loss for the year as net realised gains/losses on financial assets.The fair values of quoted investments are based on current bid prices. If the market for a financial asset is notactive, the group establishes fair value by using valuation techniques. These include the use of recent arm’s lengthtransactions, reference to other instruments that are substantially the same, and discounted cash flow analysis.Unquoted investments are classified as available-for-sale investments. They are shown at fair value unless theirvalue cannot be reliably measured in which case when they are carried at cost less provision for impairment.Impairment of financial assetsThe group assesses at the end of each reporting period whether there is objective evidence that a financial asset(or group of financial assets) is impaired. Impairment losses are recognised if there is objective evidence ofimpairment as a result of one or more events that have occurred after the initial recognition of the asset, andthat those events have an impact on the estimated future cash flows of the financial asset that can be reliablyestimated.The impairment loss so recognised is measured as the difference between the asset’s carrying amount and thepresent value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.Financial liabilities and equity instruments issued by the companyDebt and equity instruments are classified as either financial liabilities or as equity in accordance with the substanceof the contractual arrangement.PAGE 422011 ANNUAL REPORT & FINANCIAL STATEMENTS
<strong>CIC</strong> INSURANCE GROUP LIMITEDNotes to the Financial Statements continuedFor the year ended 31 December 20111 ACCOUNTING POLICIES (Continued)Adoption of new and revised International Financial Reporting Standards (IFRSs) and Interpretations (IFRIC) (Continued)(c)Early adoption of standards (Continued)Classification as debt or equityAn equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting allof its liabilities. Equity instruments issued by the group are recorded at the proceeds received, net of direct issuecosts.Financial liabilitiesFinancial liabilities are classified as other financial liabilities.Other financial liabilitiesOther financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs and aresubsequently measured at amortised cost using the effective interest method, with interest expense recognised onan effective yield basis. The effective interest method is a method of calculating the amortised cost of a financialliability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactlydiscounts estimated future cash payments through the expected life of the financial liability, or, where appropriate,a shorter period.Derecognition of financial liabilitiesThe group derecognises financial liabilities when, and only when, the group’s obligations are discharged, cancelledor they expire.Cash and cash equivalentsFor the purposes of the statement of cash flows, cash and cash equivalents comprise cash on hand, deposits heldat call with banks, other short-term highly liquid investments with original maturities of three months or less, andbank overdrafts. Bank overdrafts are included within borrowings in current liabilities in the statement of financialposition.DividendsDividends on ordinary shares are charged directly to equity in the period in which they are paid. Dividenddistributions to the company’s shareholders are recognised as a liability in the financial statements in the year inwhich the dividends are approved by the shareholders.ComparativesWhere necessary, comparative figures have been adjusted to conform to changes in presentation in the currentyear.2011 ANNUAL REPORT & FINANCIAL STATEMENTS PAGE 43
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