Our Accounts 75
Notes to the Financial Statements continued
31 December 2012
7. Investment income
Accounting for investment income
Investment income includes dividends, interest from investments at fair value, interest on loans and receivables, interest on loans secured on
residential property and rents. Dividends are included on an ex-dividend basis. Interest receivable on loans and receivables is calculated on an
effective interest rate basis. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the
expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability.
Group Society
2012 2011 2012 2011
Restated
£m £m £m £m
Rental income from investment properties 6.1 7.4 6.1 7.4
Income from investments at fair value through income:
- Interest income 204.6 123.2 165.0 126.8
- Dividend income 96.6 117.4 71.6 71.2
Interest on loans and receivables 0.8 1.7 0.3 0.9
Interest on loans secured on residential property 12.1 11.7 – –
Dividend income from group undertakings – – 94.0 78.6
320.2 261.4 337.0 284.9
8. Net gains/(losses) on investments
Accounting for net gains / (losses) on investments
- Realised gains or losses
Realised gains and losses on investments are calculated as the difference between net sales proceeds and purchase price.
- Unrealised gains and losses
Unrealised gains and losses on investments represent the difference between the valuation of fair value assets at the Statement of Financial
Statements and Reviews
Position date and their valuation at the last Statement of Financial Position date, or where purchased during the year, the purchase price. An
adjustment is made to unrealised gains and losses for the prior year’s unrealised element included in the current year’s realised gains and losses.
Group Society
2012 2011 2012 2011
£m £m £m £m
Investment properties (1.2) (1.9) (1.2) (1.9)
Investments at fair value through income:
- Debt securities 109.0 350.3 86.4 335.1
Our Businesses
- Equity securities 295.0 (33.1) 241.5 (34.5)
- Derivatives at fair value through income (28.1) 110.1 (22.6) 108.6
Investments in group undertakings – – (90.0) (34.4)
374.7 425.4 214.1 372.9
Included within net gains on investments are realised gains of £148.8m (2011: £174.4m) for the Group and realised gains of £126.0m
(2011: £114.9m) for the Society.
Risk Management
9. Other income
Accounting for other income
Other income primarily relates to interest receivable and unit linked income.
Group Society
2012 2011 2012 2011
Corporate Governance
£m £m £m £m
Interest receivable 22.1 17.6 0.1 0.2
Unit linked income 5.5 3.8 5.5 3.8
Other income 14.1 29.6 0.3 15.1
41.7 51.0 5.9 19.1
Our Accounts