104 / 203
103
3.4
Derecognition of financial assets and financial liabilities
The Group derecognises an asset:
• when the contractual rights to the cash flows from the asset expires;
• where there is a transfer of contractual rights to receive cash flows on the asset in a transaction in
which substantially all the risks and rewards of ownership of the asset are transferred; or
• where the Group retains the contractual rights to the cash flows from these assets, but assumes
a corresponding liability to transfer these contractual rights to another party and consequently
transfers all or substantially all the risks and benefits associated with the assets.
Where the Group retains substantially all the risks and rewards of ownership of the financial asset, the Group
continues to recognise the asset.
The Group derecognises a financial liability when its contractual obligations are
discharged or cancelled or expire.
3.5
Financial Instruments, owner occupied property (accounting policy note 8) and insurance and
investment contract (accounting policy note 4) analysis
IFRS 13 indicates a three tier hierarchy for fair value measurement disclosures:
Level 1:
Quoted prices (unadjusted) in active markets for identical assets or liabilities. These
are the readily available in the market and are normally obtainable from multiple
sources.
Level 2:
Inputs other than quoted prices included within Level 1 that are observable for the
asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3:
Inputs for the asset or liability that is not based on observable market data
(unobservable inputs).
4. INSURANCE AND INVESTMENT CONTRACTS
4.1
Classification of contracts
An insurance contract is a contract under which the insurer accepts significant insurance risk from the
policyholder by agreeing to compensate the policyholder if a specified uncertain future event (the insured
event) adversely affects the policyholder. Such contracts may also transfer financial risk. The Group
defines significant insurance risk as the possibility of having to pay benefits on the occurrence of an
insured event that is significantly more than the benefits payable if the insured event did not occur.
Insurance contracts are classified in three main categories, depending on the type of insurance risk
exposure, namely long-term insurance, short-term insurance and investments.
Investment contracts are those contracts that transfer financial risk with no significant insurance risk.
These are contracts where the Group does not actively manage the investments of the policyholder
over the lifetime of each policy contract. Benefits are linked to the performance of a designated pool
of assets, selected based on the policyholder risk appetite.
Financial risk is the risk of a possible future change in one or more of a specified interest rate, financial
instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or
credit index or other variable, provided in the case of a non-financial variable that the variable is not
specific to a party to the contract.
The Group issues long-term insurance contracts that contain a discretionary participation feature
(‘DPF’). This feature entitles the contract holder to receive, as a supplement to guaranteed benefits,
additional benefits:
• that are likely to be a significant portion of the total contractual benefits;
• whose amount or timing is contractually at the discretion of the insurer; and