Our Accounts 117
Notes to the financial statements continued
31 December 2012
41. Contingent liabilities
Accounting for contingent liabilities
Contingent liabilities are disclosed if there is a possible future obligation as a result of a past event, or if there is a present obligation
as a result of a past event but either a payment is not probable or the amount cannot be reasonably estimated.
The Society has granted a contingent loan facility to the RNPFN fund, a closed fund within the Group, up to a maximum of £100m,
to be used in the event of a shortfall in the capital resources of that fund. No drawdown of this facility is anticipated. The Society has
also granted a capital facility of £20m to the board of Liverpool Victoria General Insurance Group Limited to be used in the event of a
shortfall in the capital solvency.
As part of the arrangements whereby the Society transferred responsibility for the management of its investment portfolio to
Threadneedle Asset Management Ltd and Threadneedle Investment Services Ltd (“Threadneedle”), Liverpool Victoria Portfolio Managers
Ltd (“LVPM”) resigned, and Threadneedle was appointed, as the Authorised Corporate Director (“ACD”) of the LV= Property OEIC.
Simultaneous with the change in ACD, the Society provided an indemnity to Threadneedle for any losses incurred by Threadneedle
as a result of any actual or suspected mis-pricing of the LV= Property OEIC by LVPM, including any costs of rectification or investor
compensation. No claims have been made under this indemnity.
42. Commitments
Accounting for assets held under leases
Where assets are financed by leasing arrangements and the risks and rewards are substantially transferred to the Group, such finance
leases are treated as if the assets had been purchased outright and the corresponding liability to the lessor is included as an obligation
in trade and other payables. Depreciation on leased assets is charged to the Statement of Comprehensive Income on a straight line
basis over the lower of the term of the lease or its estimated useful life. The capital element on finance leases is shown in the property
and equipment note.
Lease payments are treated as consisting of capital and interest elements and the interest is charged to the Statement of
Statements and Reviews
Comprehensive Income.
All other leases are operating leases and the costs in respect of operating leases are charged on a straight line basis over the lease
term. The value of any lease incentive received to take on an operating lease (for example, rent free periods) is recognised as deferred
income and is released over the life of the lease.
a) Capital commitments Group Society
2012 2011 2012 2011
£m £m £m £m
Authorised and contracted commitments payable after
Our Businesses
31 December not provided for in respect of:
– property investments 0.7 1.4 0.7 1.4
– other financial investments 35.2 49.5 35.2 49.5
– property and equipment - 0.9 - 0.9
35.9 51.8 35.9 51.8 Risk Management
Corporate Governance
Our Accounts