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Allianz Annual Report 2012

Real estate held for own use (e.g. real estate and buildings, including buildings on leased land) is carried at cost less accumulated depreciation and impairments. The capital- ized cost of buildings is calculated on the basis of acquisi- tion cost and depreciated on a straight-line basis over a maximum of 50 years in accordance with their useful lives. Animpairmentisrecognizedwhentherecoverableamount of these assets is less than their carrying amount. Where it is not possible to identify separate cash flows for estimat- ing the recoverable amount of an individual asset, an esti- mate of the recoverable amount of the cash generating unit to which the asset belongs is used. Software, which includes software purchased from third parties or developed internally, is initially recorded at cost and is amortized on a straight-line basis over the estimated useful service lives or contractual terms, generally over 2 to 10 years. Equipment is carried at cost less accumulated deprecia- tion and impairments. Depreciation is generally computed using the straight-line method over the estimated useful lives of the assets. The estimated useful life of equipment ranges from 2 to 10 years. The ­Allianz Group also records the fixed assets of its fully consolidated private equity investments and Alternative Investments, e.g. wind parks, solar parks and vending ma- chines, within property and equipment. These assets are carried at cost less accumulated depreciation and impair- ments. Depreciation is generally computed using the straight-line method over estimated useful lives of the as- sets. The estimated useful life for the wind parks ranges from 20 to 25 years and for the vending machines from 4 to 8 years. Costs for repairs and maintenance are expensed as in- curred, while improvements, if they extend the useful life of the asset, provide additional functionality or otherwise enhance the value of the asset, are capitalized. NON-CURRENT ASSETS AND DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALE Non-current assets or disposal groups are classified as held for sale if their carrying amounts will be principally recov- ered through a sale transaction rather than through con- tinuing use. This requires that the asset or disposal group must be available for immediate sale in its present condi- tion and its sale must be highly probable. The appropriate level of management must be committed to a plan to sell Aggregate policy reserves for non-unit-linked invest- ment contracts Non-unit-linked investment contracts without DPF are ac- counted for under IAS 39. The aggregate policy reserve for those contracts is initially recognized at amortized cost, or the amount of the deposit by the contract holder, net of the transaction costs that are directly attributable to the issu- ance of the contract. Subsequently, those contracts are measured at amortized cost using the effective interest rate method. Liability adequacy testing Liability adequacy tests are performed for each insurance portfolio on the basis of estimates of future claims, costs, premiums earned and proportionate investment income. For short-duration contracts, a premium deficiency is rec- ognized if the sum of expected claim costs and claim ad- justment expenses, expected dividends to policyholders, capitalized DAC, and maintenance expenses exceeds re- lated unearned premiums while considering anticipated investment income. For traditional long-duration con- tracts and limited payment contracts, if actual experience regarding investment yields, mortality, morbidity, termina- tions or expense indicate that existing contract liabilities, along with the present value of future gross premiums, will not be sufficient to cover the present value of future bene- fits and to recover capitalized DAC, a premium deficiency is recognized. For other long-duration contracts, if the pres- ent value of estimated gross profits or margins, plus un- earned revenue liability if applicable, will not be sufficient to recover capitalized DAC, a premium deficiency is recog- nized. Please refer to note 3, where the processes and controls for ensuring an appropriate use of estimates and assumptions are explained. OTHER ASSETS Other assets primarily consist of receivables, prepaid ex- penses, derivative financial instruments used for hedging that meet the criteria for hedge accounting, firm commit- ments, property and equipment and other assets. Receivables are generally recorded at face value less any payments received, net of valuation allowances. Property and equipment includes real estate held for own use, software, equipment and fixed assets of fully consoli- dated private equity investments and Alternative Invest- ments. Annual Report 2012    Allianz Group240

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