Notes to the consolidated The adoption of IFRS 9 will have an effect impact the disclosures in respect of fair
financial statements on the classification and measurement
of the Group’s financial assets.
value measurement on adoption.
continued IAS 1 (amended): Presentation of Financial
IFRS 10: Consolidated Financial Statements Statements is effective for annual periods
is effective for annual periods beginning beginning 1 July 2012. The amendment
2 Significant accounting policies continued 1 January 2014, with retrospective will require a change in the presentation
2.2 Basis of preparation continued application. It replaces the portion of IAS 27: of items of other comprehensive income,
Consolidated and Separate Financial requiring companies to group together
IAS 19: Employee Benefits (2011) is due Statements that addresses the accounting items within other comprehensive income
to be in effect from 1 January 2013. The for consolidated financial statements. IFRS that may be reclassified to the profit or loss
amendments require immediate recognition 10 revises the definition of ‘control’, the section of the income statement. Upon
of actuarial gains and losses in other key factor in determining whether an entity adoption, the amendment will result in
comprehensive income and to eliminate is consolidated. The adoption of IFRS 10 changes to the presentation of the Group’s
the corridor method that the Group currently is not expected to have an effect on the other comprehensive income.
operates. In addition, net interest income Group’s consolidated financial statements.
or expense is required to be calculated using 2.3 Basis of consolidation
the discount rate used to measure the IFRS 11: Joint Arrangements is effective for (a) Subsidiaries
defined benefit asset or liability. The key annual periods beginning 1 January 2014, Subsidiaries are those entities controlled
impact of adopting the amendments to IAS with retrospective application. It replaces by the Group. Control exists when the
19 for the year ended 31 December 2012 IAS 31: Interests in Joint Ventures Group has the power, directly or indirectly,
would have been to recognise a liability and SIC-13: Jointly-Controlled Entities – to govern the financial and operating policies
of £16.9 million. Non-Monetary Contributions by Venturers. of an entity so as to obtain benefits from
The standard clarifies the definition of a its activities. Generally this occurs when
IFRS 9: Financial Instruments sets out the joint arrangement and uses the principle the Group obtains a shareholding of more
recognition and measurement requirements of control in IFRS 10 to define joint control. than half of the voting rights of an entity.
for financial instruments and some contracts The standard is not expected to have In assessing control, potential voting rights
to buy or sell non-financial items. The IASB a significant impact on the consolidated that are currently exercisable or convertible
has broken the project into three phases, financial statements of the Group. are taken into account. Management also
classification and measurement, impairment exercise significant judgement about
methodology and hedge accounting. The IFRS 12: Disclosure of Interests in Other any actual or perceived control acquired
IASB continues to add to the standard as Entities is effective for annual periods indirectly, through normal commercial
it completes the various phases of its project beginning 1 January 2014, with retrospective dealings with entities of a special purpose
and it will eventually form a complete application. It includes all of the disclosures nature. The Group does not undertake any
replacement for IAS 39: Financial Instruments that were previously included in IAS 27 such arrangements with such entities where
Recognition and Measurement. related to consolidated financial statements, control of that entity would be acquired.
as well as all of the disclosures that were The consolidated financial statements
IFRS 9 (2010): Financial Instruments: previously included in IAS 31 and IAS 28: include the assets, liabilities and results
Classification and Measurement is due to Investment in Associates. A number of of the Group up to 31 December each year.
be effective from 1 January 2015. Under the new disclosures are also required, including The financial statements of subsidiaries
standard, a financial asset is measured at the judgements made by management are included in the consolidated financial
amortised cost if it is held within a business in determining whether it controls an entity. statements only from the date that control
model whose objective is to hold assets to The standard will impact the disclosures commences until the date that control ceases.
collect contractual cash flows and its cash made by the Group in respect of its interests
flows are solely payments of principal and in subsidiaries, joint arrangements and Hiscox Dedicated Corporate Member
interest. All other financial assets are associates on adoption. Limited (‘HDCM’) underwrites as a corporate
measured at fair value, with changes in fair member of Lloyd’s on the main Syndicates
value recognised in profit or loss, ‘FVTPL’, As a result of the issuance of IFRS 10, IFRS managed by Hiscox Syndicates Limited
except for some equity investments for 11 and IFRS 12, consequential amendments (the ‘main managed Syndicates’ numbered
which changes in fair value are recognised have been made to IAS 27 and IAS 28. IAS 33 and 3624). As at 31 December 2012,
in other comprehensive income. 27 now contains requirements only relating HDCM owned 72.5% of Syndicate 33 (2011:
to separate financial statements, while 72.5%). In view of the several but not joint
An exposure draft containing amendments the amendments to IAS 28 incorporate liability of underwriting members at Lloyd’s
to the standard was released in November the accounting for joint ventures. Both for the transactions of syndicates in which
2012. It introduces a third measurement standards are effective for annual periods they participate, the Group’s attributable
category, under which a financial asset is beginning on or after 1 January 2014. share of the transactions, assets and
required to be measured at fair value through The adoption of these standards is not liabilities of these Syndicates has been
other comprehensive income, ‘FVOCI’, if its expected to have an effect on the Group’s included in the financial statements.
cash flows are solely payments of principal consolidated financial statements.
and interest and are held in a business The Group manages the underwriting of,
model in which assets are managed both IFRS 13: Fair Value Measurement is effective but does not participate as a member of,
in order to collect contractual cash flows for annual periods beginning 1 January Syndicate 6104 at Lloyd’s which provides
and for sale. The existing option to measure 2013 and is to be applied prospectively. reinsurance to Syndicate 33 on a normal
an asset at FVTPL in order to reduce an The standard defines fair value, sets out commercial basis. Consequently, aside
accounting mismatch would be available in a single IFRS a framework for measuring from the receipt of managing agency fees,
for financial assets that would otherwise fair value, and requires disclosures about defined profit commissions as appropriate
be mandatorily measured at FVOCI. fair value measurements. The standard will and interest arising on effective assets
56 Notes to the consolidated financial statements Hiscox Ltd Report and Accounts 2012