12 Net foreign exchange (losses)/gains
The net foreign exchange gains for the year include the following amounts:
2012 2011
£000 £000
Exchange (losses)/gains recognised in the consolidated income statement (20,173) 7,816
Exchange (losses)/gains classified as a separate component of equity (35,806) 11,060
Overall impact of foreign exchange related items on net assets (55,979) 18,876
The above excludes profit or losses on foreign exchange derivative financial instruments which are included within the investment result.
Net unearned premiums and deferred acquisition costs are treated as non-monetary items in accordance with IFRS. As a result, a foreign
exchange mismatch arises caused by these items being earned at historical rates of exchange prevailing at the original transaction date
whereby resulting claims are retranslated at the end of each period. The impact of this mismatch on the income statement is shown below.
2012 2011
£000 £000
Opening balance sheet impact of non-retranslation of non-monetary items 2,144 (1,251)
(Loss)/gain included within profit representing the non-retranslation of non-monetary items (4,818) 3,395
Closing balance sheet impact of non-retranslation of non-monetary items (2,674) 2,144
13 Foreign currency items on intragroup borrowings
The Group has loan arrangements, denominated in US Dollars and Euros, in place between certain Group companies. In most cases,
as one party to each arrangement has a functional currency other than the US Dollar or the Euro, foreign exchange (gains)/losses arise
which are not eliminated through the income statement on consolidation. Implicit offsetting gains/(losses) are reflected instead on
retranslation of the counterparty company’s closing balance sheet through other comprehensive income and into the Group’s currency
translation reserve within equity.
Consolidated
Consolidated other Total
income comprehensive impact on
statement income equity
2012 2012 2012
Impact as at 31 December 2012 £000 £000 £000
Unrealised translation gains/(losses) on intragroup borrowings 891 (891) –
Total gains/(losses) recognised 891 (891) –
Consolidated
Consolidated other Total
income comprehensive impact on
statement income equity
2011 2011 2011
Impact as at 31 December 2011 £000 £000 £000
Unrealised translation (losses)/gains on intragroup borrowings (4,540) 4,540 –
Total (losses)/gains recognised (4,540) 4,540 –
Notes to the consolidated financial statements Hiscox Ltd Report and Accounts 2012 81