Annual report - front page - Jubilee Insurance

NOTES TO THE FINANCIAL STATEMENTSAS AT 31ST DECEMBER 2011 (CONTINUED)2.8 INVESTMENT PROPERTYBuildings, or part of a building, (freehold or held under a finance lease) and land (freehold or held under an operating lease)held for long term rental yields and/or capital appreciation are classified as investment property. Investment property ismeasured at cost on initial recognition. Investment property is carried at fair value, representing open market valuedetermined annually by external valuer’s. Changes in fair values are included in investment income in income statement.2.9 INTANGIBLE ASSETS(i)GoodwillGoodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the netidentifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions ofsubsidiaries is included in intangible assets. Goodwill on acquisitions of associates is included in investments inassociates. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gainsand losses on disposal of an entity include the carrying amount of goodwill relating to the entity sold.Goodwill is allocated to cash-generating units for the purpose of impairment testing. Each of those cash-generatingunits represents the Group’s investment in each country of operation by each reporting segment.(ii)Computer softwareAcquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use thespecific software. These costs are amortized over their estimated useful lives (three to five years). Costs associatedwith developing or maintaining computer software programmes are recognized as an expense as incurred. Coststhat are directly associated with the production of identifiable and unique software products controlled by the Group,and that will probably generate economic benefits exceeding costs beyond one year, are recognized as intangibleassets. Direct costs include the software development, employee costs and an appropriate portion of relevantoverheads. Computer software development costs recognized as assets are amortized over their estimated useful lives(not exceeding three years).2.10 FINANCIAL ASSETS AND LIABILITIESAll financial assets are recognized and derecognized on trade date when the purchase or sale of a financial asset is undera contract whose terms require delivery of the financial asset within the timeframe established by the market concerned.Financial assets are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fairvalue through profit or loss (FVTPL), which are initially measured at fair value.All recognized financial assets are subsequently measured in their entirety at either amortized cost or fair value.Fair values of quoted investments in active markets are based on quoted bid prices. Fair values for unquoted investments areestimated using valuation techniques. These include the use of recent arm’s length transactions, discounted cash flowanalysis and other valuation techniques commonly used by market participants.(i)Classification of financial assetsFor the purposes of classifying financial assets an instrument is an ‘equity instrument’ if it is a non-derivative and meetsthe definition of ‘equity’ for the issuer (under IAS 32 Financial Instruments: Presentation). All other non-derivativefinancial assets are ‘debt instruments’.(ii)Debt instruments at amortized cost and the effective interest methodDebt instruments are measured at amortized cost if both of the following conditions are met:• The asset is held within a business model whose objective is to hold assets in order to collect contractual cashflows; and• The contractual terms of the instrument give rise on specified dates to cash flows that are solely payments ofprincipal and interest on the principal amount outstanding.Debt instruments meeting these criteria are measured initially at fair value plus transaction costs, except if they aredesignated as at FVTPL. They are subsequently measured at amortized cost using the effective interest method lessany impairment, with interest revenue recognized on an effective yield basis in investment revenue.Subsequent to initial recognition, the Group is required to reclassify debt instruments from amortized cost to FVTPLif the objective of the business model changes so that the amortized cost criteria are no longer met.JUBILEE HOLDINGS LIMITEDAnnual Report and Financial Statements 2011 31