4.4 Legal risk - Scor

(e) Cash and cash equivalents
Cash and cash equivalents comprise cash, net bank balances and short-term deposits or investments with a maturity less
than or equal to three months at the date of purchase or deposit. Money market funds are also classified as cash equivalent,
though only to the extent that fund invested assets qualify as cash equivalents, or there are strict fund management policies
and limits that lead the funds to qualify as cash equivalents.
Financial debt
Financial liabilities, with the exception of liabilities arising from reinsurance transactions, are classified as financial debts,
financial instruments and other liabilities.
Interest on financial debt is included within financing expenses.
(a) Subordinated financial debts or debt securities
These items comprise the various subordinated or unsubordinated bonds issued by the Group. These loans are classified
as financial debts, in accordance with IAS 32 - Financial Instruments: Presentation.
At initial recognition, all borrowings are recorded at fair value less directly attributable transaction costs. After initial
recognition, they are measured at amortized cost using the effective interest rate method.
(b) Real estate financing
This caption includes debt relating to the acquisition of real estate property. At initial recognition, real estate financing debt is
recorded at fair value less directly attributable transaction costs. After initial recognition, they are measured at amortized
cost.
(c) Other financial debt
This caption includes primarily debt relating to financial lease agreements. Debt under financial lease contracts is recorded
at fair value less directly attributable transaction costs. After initial recognition, they are measured at amortized cost using
the effective interest rate method where this method has a significant impact compared to the nominal contractual rate
method.
Derivative instruments and hedging instruments
Derivative instruments are recorded and classified at fair value through income (designated at inception) unless they are
designated as hedging instruments.
All derivatives are carried as assets when the fair values are positive and as liabilities when the fair values are negative.
The accounting method varies according to whether or not the derivative instrument is designated as a hedging instrument,
as described below in “Hedging Instruments.”
When the Group has not designated the derivative as a hedging instrument, gains and losses resulting from the change in
the fair value of the instrument are recorded in the statement of income in the period in which they occur. The Group uses
the following derivative instruments to reduce its exposure to various risks: swaps based on interest rates, mortality indices
and real estate indices, foreign currency forward purchase and sale contracts, caps and floors, and puts and calls.
(a) Embedded derivative instruments
An embedded derivative is a component of a hybrid instrument which includes a non-derivative host contract, which causes
part of the hybrid instrument’s cash flow to vary in the same way as that of a freestanding derivative.
• A material embedded derivative is separated from the host contract and is recognized as a derivative:when its
economic features and risks are not closely linked to the economic features of the host contract;
• where the embedded instrument has the same conditions as a separate derivative instrument; and
• where the hybrid instrument is not assessed at fair value through the statement of income.
Where an embedded derivative has been separated from its host contract, it is recognized in accordance with the guidance
relating to the accounting for derivative financial instruments.
Where the embedded derivative represents a significant part of the instrument and cannot be separated from the host
contract, the hybrid instrument is treated as an instrument held for trading. Gains and losses resulting from variations in the
fair value of the hybrid are recognized in the statement of income in the period during which they occur.
(b) Hedging instruments
A hedging instrument is a designated derivative instrument or, in the case of a single foreign currency hedge, a designated
non-derivative asset or liability for which the fair value or cash flows offset variations in the fair value or cash flows of the
hedged item.
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