2 Significant accounting policies continued between two Group entities that have exchange rates (unless this average is
2.3 Basis of consolidation continued different functional currencies. Unrealised not a reasonable approximation of the
(a) Subsidiaries continued gains arising from transactions with cumulative effect of the rates prevailing
associates are eliminated to the extent of on the transaction dates, in which case
included within the experience account, the Group’s interest in the entity. Unrealised income and expenses are translated
the Group has no share in the assets, liabilities gains arising from transactions with at the date of the transactions); and
or transactions of Syndicate 6104, nor is associates are eliminated against the all resulting exchange differences are
it controlled. The position and performance investment in the associate. Unrealised recognised as a separate component
of that Syndicate is therefore not included losses are eliminated in the same way of equity.
in the Group’s financial statements. as unrealised gains, but only to the extent
that there is no evidence of impairment. When a foreign operation is sold, such
The Group uses the acquisition method exchange differences are recognised
of accounting to account for the acquisition 2.4 Foreign currency translation in the income statement as part of the gain
of subsidiaries. At the date of acquisition, (a) Functional currency or loss on sale.
the Group recognises the identifiable assets Items included in the financial statements
acquired and liabilities assumed as of each of the Group’s entities are measured Goodwill and fair value adjustments arising
part of the overall business combination using the currency of the primary economic on the acquisition of a foreign entity
transaction at their acquisition date fair environment in which the entity operates are treated as the foreign entity’s assets
value. Recognition of these items is subject (the ‘functional currency’). The functional and liabilities and are translated at the
to the definitions of assets and liabilities currency of all individual entities in the Group closing rate.
in the Framework for the Preparation and is deemed to be Sterling with the exception
Presentation of Financial Statements. The of the entities operating in France, Germany, 2.5 Property, plant and equipment
Group may also recognise intangible items the Netherlands, Spain, Portugal, Ireland Property, plant and equipment are stated
not previously recognised by the acquired and Belgium whose functional currency at historical cost less depreciation and any
entity such as customer relationships. is Euros, those subsidiary entities operating impairment loss. Historical cost includes
from the US and Bermuda whose functional expenditure that is directly attributable to
(b) Associates currency is US Dollars, Hiscox Insurance the acquisition of the items. Subsequent
Associates are those entities in which the Company (Guernsey) Limited and Syndicate costs are included in the asset’s carrying
Group has significant influence but not 3624 whose functional currency is also amount or recognised as a separate asset,
control over the financial and operating US Dollars. as appropriate, only when it is probable that
policies. Significant influence is generally future economic benefits associated with
identified with a shareholding of between (b) Transactions and balances the item will flow to the Group and the cost
20% and 50% of an entity’s voting rights. Foreign currency transactions are translated of the item can be measured reliably. All
The consolidated financial statements into the functional currency using the other repairs and maintenance items are
include the Group’s share of the total exchange rates prevailing at the dates of the charged to the income statement during the
recognised gains and losses of associates transactions. Foreign exchange gains and financial period in which they are incurred.
on an equity-accounted basis from the date losses resulting from the settlement of such
that significant influence commences until transactions and from the retranslation at Land and artwork assets are not depreciated
the date that significant influence ceases. year end exchange rates of monetary assets as they are deemed to have indefinite
The Group’s share of its associates’ post- and liabilities denominated in foreign useful economic lives. The cost of leasehold
acquisition profits or losses after tax is currencies are recognised in the income improvements is amortised over the
recognised in the income statement for each statement, except when deferred in equity unexpired term of the underlying lease or the
period, and its share of the movement in as IAS 39 effective net investment hedges estimated useful life of the asset, whichever
the associates’ net assets is reflected in the or when the underlying balance is deemed is shorter. Depreciation on other assets is
investments’ carrying values in the balance to form part of the Group’s net investment calculated using the straight-line method to
sheet. When the Group’s share of losses in a subsidiary operation and is unlikely allocate their cost or revalued amounts, less
equals or exceeds the carrying amount to be settled in the foreseeable future. their residual values, over their estimated
of the associate, the carrying amount is Non-monetary items carried at historical useful lives. The rates applied are as follows:
reduced to nil and recognition of further cost are translated in the balance sheet buildings 50 years
losses is discontinued except to the extent at the exchange rate prevailing on the vehicles 3 years
that the Group has incurred obligations original transaction date. Non-monetary leasehold improvements
in respect of the associate. items measured at fair value are translated including fixtures
using the exchange rate ruling when and fittings 10–15 years
(c) Transactions eliminated the fair value was determined. furniture, fittings
on consolidation and equipment 3–15 years
Intragroup balances, transactions and (c) Group companies
any unrealised gains arising from intragroup The results and financial position of all The assets’ residual values and useful lives
transactions are eliminated in preparing the Group entities that have a functional are reviewed at each balance sheet date
the consolidated financial statements. currency different from the presentation and adjusted if appropriate.
Unrealised losses are also eliminated unless currency are translated into the presentation
the transaction provides evidence of currency as follows: An asset’s carrying amount is written down
an impairment of the asset transferred. assets and liabilities for each balance immediately to its recoverable amount if
In accordance with IAS 21, foreign currency sheet presented are translated at the asset’s carrying amount is greater than
gains and losses on intragroup monetary the closing rate at the date of that its estimated recoverable amount. Gains
assets and liabilities may not fully eliminate balance sheet; and losses on disposals are determined by
on consolidation when the intragroup income and expenses for each income comparing proceeds with carrying amount.
monetary item concerned is transacted statement are translated at average These are included in the income statement.
Notes to the consolidated financial statements Hiscox Ltd Report and Accounts 2012 57