annual report 2007 - the Admiral Group plc

58 FINANCIAL STATEMENTSand expected changes in pricing and expensesincurred during the period. Managementestimates growth rates and changes in pricingbased on past practices and expected futurechanges in the market.Deferred acquisition costs:Acquisition costs comprise all direct andindirect costs arising from the conclusion ofinsurance contracts. Deferred acquisitioncosts represent the proportion of acquisitioncosts incurred that corresponds to theunearned premiums provision at the balancesheet date. This balance is held as anintangible asset. It is amortised over the termof the contract as premium is earned.Software:Purchased software is recognised as anintangible asset and amortised over itsexpected useful life (generally between twoand four years). The carrying value is reviewedevery six months for evidence of impairment,with the value being written down if anyimpairment exists. Impairment may bereversed if conditions subsequently improve.f) Property, plant and equipment anddepreciationAll property, plant and equipment is statedat cost less accumulated depreciation.Depreciation is calculated using the straightlinemethod to write off the cost lessresidual values of the assets over their usefuleconomic lives. These useful economic livesare as follows:Motor vehiclesFixtures, fittings andequipmentComputer equipmentImprovements to shortleasehold properties4 years4 years2 to 4 years4 yearsImpairment of property, plant andequipmentIn the case of property plant and equipment,carrying values are reviewed at each balancesheet date to determine whether there areany indications of impairment. If any suchindications exist, the asset’s recoverableamount is estimated and compared to thecarrying value. The carrying value is the higherof the net realisable value and the asset’svalue in use. Impairment losses are recognisedthrough the income statement.g) Leased assetsThe rental costs relating to assets held underoperating leases are charged to the incomestatement on a straight-line basis over the lifeof the lease.Leases under the terms of which the Groupassumes substantially all of the risks andrewards of ownership are classed as financeleases. Assets acquired under finance leasesare included in property, plant and equipmentat fair value on acquisition and are depreciatedin the same manner as equivalent ownedassets. Finance lease and hire purchaseobligations are included in creditors, and thefinance costs are spread over the periods ofthe agreements based on the net amountoutstanding.h) Financial assets – investments andreceivablesFinancial assets are classified according to thepurpose for which they were acquired. TheGroup's investments in money market liquidityfunds are designated as financial assets atfair value through profit or loss (FVTPL) atinception.This designation is permitted under IAS 39, asthe investments in money market funds aremanaged as a group of assets and internalperformance evaluation of this group isconducted on a fair value basis.Financial assets at FVTPL are stated atfair value, with any resultant gain or lossrecognised through the income statement.Receivables are stated at their historic cost(discounted if material) unless they areimpaired. Impairment losses are recognisedthrough the income statement.i) Cash and cash equivalentsCash and cash equivalents includes cash inhand, deposits held at call with banks, andother short-term deposits with originalmaturities of three months or less.j) Share capitalShares are classified as equity when there isno obligation to transfer cash or other assets.k) Loans and borrowingsInterest bearing loans and borrowingsare recognised initially at fair value lessattributable transaction costs. Subsequent toinitial recognition, interest bearing loans andborrowings are stated at amortised cost with