GROUP ACCOUNTING POLICIES (continued) 3.4 Derecognition of financial assets and financial liabilities The Group derecognises an asset: • when the contractual rights to the cash flows from the asset expires; • where there is a transfer of contractual rights to receive cash flows on the asset in a transaction in which substantially all the risks and rewards of ownership of the asset are transferred; or • where the Group retains the contractual rights to the cash flows from these assets, but assumes a corresponding liability to transfer these contractual rights to another party and consequently transfers all or substantially all the risks and benefits associated with the assets. Where the Group retains substantially all the risks and rewards of ownership of the financial asset, the Group continues to recognise the asset. The Group derecognises a fnancial liability when its contractual obligations are discharged or cancelled or expire. 3.5 Financial Instruments, property and equipment (accounting policy note 8) and insurance and investment contracts (accounting policy note 4) analysis IFRS 13 indicates a three tier hierarchy for fair value measurement disclosures: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. These are the readily available in the market and are normally obtainable from multiple sources. Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3: Inputs for the asset or liability that is not based on observable market data (unobservable inputs). 4. Insurance and investment contracts 4.1 Classification of contracts An insurance contract is a contract under which the insurer accepts significant insurance risk from the policyholder by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder. Such contracts may also transfer financial risk. The Group defines significant insurance risk as the possibility of having to pay benefits on the occurrence of an insured event that is significantly more than the benefits payable if the insured event did not occur. Insurance contracts are classified in three main categories, depending on the type of insurance risk exposure, namely long-term insurance, short-term insurance and investments. Investment contracts are those contracts that transfer financial risk with no significant insurance risk. These are contracts where the Group does not actively manage the investments of the policyholder over the lifetime of each policy contract. Benefits are linked to the performance of a designated pool of assets, selected based on the policyholder risk appetite. Financial risk is the risk of a possible future change in one or more of a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract. 3. Financial instruments (continued) 108 Group Accounting Policies
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