talanx group annual report 2011 en

Nature of risks Notes on the balance
sheet – assets
Notes on the balance
sheet – liabilities
Notes on the
statement of income
Other information List of shareholdings
We have allocated all financial instruments measured at fair value to a level of the fair value hierarchy
in accordance with IFRS 7. For further explanation please see our remarks in item 11 of the Notes
“Fair value hierarchy.”
The value determined on the basis of valuation models at time of acquisition can, however, diverge
from the actual cost of acquisition. The resulting measurement difference constitutes a theoretical
“day-one profit/loss.” This produced only a negligible loss at the balance sheet date.
Impairment: At each balance sheet date we review our financial assets – with the exception of financial
assets at fair value through profit or loss (since impairments are implicitly included in the fair
value) – with an eye to objective, substantial indications of impairment. IAS 39.59 contains a list of
objective indications for impairment of a financial asset. IAS 39.61 sets out additional requirements
with regard to indications of objective evidence for the impairment of equity instruments, according
to which impairment exists if there is a significant or prolonged decrease in the fair value below
acquisition cost.
For the Group, this means that a decrease in the fair value of equity instruments is deemed to be
significant if that value falls by more than 20% below acquisition cost; a prolonged decrease exists if
the fair value falls consistently below cost for a period of at least nine months. In the case of securities
denominated in foreign currencies, assessment is made in the functional currency of the entity
holding the equity instrument. We apply these rules in a similar manner for participating interests
in funds that invest in private equity. In order to reflect the specific character of these funds (in this
case initially negative yield and liquidity flows from the so-called “J curve” effect during the investment
period of the funds), we take an impairment to net asset value as an approximation of the fair
value for the first time after a two-year waiting period if there is a significant or prolonged decrease
in value.
We take the same indicators as a basis for fixed-income securities as we do for equity instruments.
Qualitative case-by-case analysis is also carried out. When forming an opinion, we refer first and
foremost to the rating of the instrument, the rating of the issuer/borrower as well as the individual
market assessment. What is more, when instruments measured at amortised cost are tested for
impairment, we examine whether material items – considered in isolation – are impaired.
Impairments are taken on the fair value as at the balance sheet date in the event of a prolonged
decrease in value – if available, on the publicly listed market price – and are recognised in the income
statement. In this context, impairments on investments are recognised directly on the assets
side – without using an adjustment account – separately from the relevant items. Reversals on debt
instruments are recognised in income up to the level of the amortised costs. In the case of financial
assets available for sale, any further amount is recognised directly in equity with no effect on income.
Reversals on equity instruments are recognised in equity via other income/expenses outside
the statement of income.
Talanx Group. Annual Report 2011
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