AEGON N.V., incorporated and domiciled in the Netherlands, is a limited liability share company organized under Dutch law and recorded in the Commercial Register of The Hague under its registered address at AEGONplein 50, 2591 TV The Hague. AEGON N.V. serves as the holding company for the
AEGON Group and has listings of its common shares in Amsterdam, New York, London and Tokyo.
AEGON N.V., its subsidiaries and its proportionally consolidated joint ventures (AEGON or ‘the Group’) have life insurance and pensions operations in over twenty countries in Europe, the Americas and Asia and are also active in savings and investment operations, accident and health insurance, general insurance and limited banking operations in a number of these countries. Headquarters are located in The Hague, the Netherlands. The Group employs approximately 31,500 people worldwide.
note 2 sUMMARy OF siGniFiCAnT ACCOUnTinG POLiCies
note 2.1 bAsis OF PResenTATiOn note 2.1.1A inTRODUCTiOn
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union (EU), with IFRS as issued by the International Accounting Standards Board (IASB) and with Part 9 of Book 2 of the Netherlands Civil Code. The consolidated financial statements have been prepared in accordance with the historical cost convention as modified by the revaluation of investment properties and those financial instruments (including derivatives) and financial liabilities that have been measured at fair value. Information on the standards and interpretations that were adopted in 2008 is provided below in paragraph 2.1.1B. Certain amounts in prior years have been reclassified to conform to the current year presentation. These reclassifications had no effect on net income or shareholders’ equity.
With regard to the income statement of AEGON N.V., article 402, Part 9 of Book 2 of the Netherlands Civil Code has been applied, allowing a simplified format.
Notes to the consolidated financial statements of AEGON Group
AMOUNTS IN EUR MILLION, UNLESS OTHERWISE STATED
Those estimates are inherently subject to change and actual results could differ from those estimates. Included among the material (or potentially material) reported amounts and disclosures that require extensive use of estimates are: fair value of certain invested assets and derivatives, deferred acquisition costs, value of business acquired and other purchased intangible assets, goodwill, policyholder claims and benefits, insurance guarantees, pension plans, income taxes and the potential effects of resolving litigated matters.
The financial statements are put to the Annual General Meeting of Shareholders on April 22, 2009 for adoption. The
shareholders’ meeting can reject the financial statements but cannot amend them.
note 2.1.1b ADOPTiOn OF neW iFRs ACCOUnTinG sTAnDARDs
New standards become effective on the date specified by IFRS, but may allow companies to opt for an earlier adoption date. In 2008, the following new standards issued by the IASB and Interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) became mandatory:
IFRIC 12 Service concession arrangements
1;IFRIC 14 IAS 19 The limit on a defined benefit asset, minimum
funding requirements and their interaction; Amendments to IAS 39 and IFRS 7 Reclassification of
financial instruments.
IFRIC 12 Service concession arrangements is mandatory for accounting periods beginning on or after January 1, 2008, but is not relevant to the Group’s operations.
Similarly, IFRIC 14 IAS 19 The limit on a defined benefit asset, minimum funding requirements and their interaction does not have an impact on the Group’s financial statements.
The amendments to IAS 39 and IFRS 7 Reclassification of financial instruments permit entities to reclassify non-derivative financial assets out of the fair value through profit or loss category in particular circumstances. The amendment also permits an entity to transfer from the available-for-sale category to the loans and receivables category where certain requirements are met. The effect of the reclassification would be to value the asset following the reclassification at amortized cost instead of at fair value. The amendments to IFRS 7
Amendments to IAS 23 Borrowing costs;
Amendments to IFRS 2 Share-based payments - vesting
conditions and cancellations;
IFRS 3 Business combinations (Revised) and IAS 27
Consolidated and separate financial statements (Revised) 1;
IFRS 8 Operating segments;
IFRIC 16 Hedges of a net investment in a foreign operation
1;Amendments to IAS 39 Eligible hedged items
1;Improvements to IFRS (2008)
1.The revision of IAS 1 is aimed at improving users’ ability to analyze and compare the information given in financial statements. It introduces for example a statement of comprehensive income. The amendment has a required adoption date of January 1, 2009 and will not impact net income or equity.
The amendments to IAS 23 remove the option of immediately recognizing as an expense borrowing costs that relate to assets that take a substantial period of time to get ready for use or sale. The amendments have a required adoption date of January 1, 2009 and will not impact equity or net income as AEGON’s accounting policy is to capitalize borrowing costs. The amendments to IFRS 2 define the term vesting condition and give guidance on the accounting for non-vesting conditions. The amendments have a required adoption date of January 1, 2009 and are not expected to have a material impact on equity or net income.
The revised IFRS 3 continues to apply the acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with some contingent payments subsequently re-measured at fair value through profit or loss. All transaction costs will be expensed. This standard comes into effect for business combinations for which the acquisition date is on or after the beginning of the first annual period beginning on or after July 1, 2009. The requirements of this standard will be considered for future business combinations.
The IASB issued IFRS 8 as part of the convergence project with the US Financial Accounting Standards Board. This new standard replaces IAS 14 Segment reporting and adopts a management approach to segment reporting as required in Statement of Financial Accounting Standards (SFAS) 131 Disclosures about segments of an enterprise and related information. The adoption of IFRS 8 only impacts segment disclosure and therefore will not have an impact on equity or net income. The standard has a required adoption date of January 1, 2009.
IFRIC 16 clarifies the accounting treatment in respect of net investment hedging including the fact that net investment hedging relates to differences in functional currency, not presentation currency and hedging instruments may be held anywhere in the Group. The requirements of IAS 21 The effects of changes in foreign exchange rates further do not apply to the hedged item. This interpretation becomes effective for annual periods beginning on or after January 1, 2009. The interpretation is not expected to have a material impact on equity or net income.
The amendments to IAS 39 clarify how the principles that determine whether a hedged risk or portion of cash flows is eligible for designation should be applied in particular situations. The amendment has a required adoption date of July 1, 2009 and is not expected to have a material impact on equity or net income.
The IASB issued, in May 2008, a number of minor amendments to IFRS which resulted from the IASB’s annual improvements project. These amendments result in accounting changes for presentation, recognition or measurement purposes as well as terminology or editorial amendments related to a variety of individual standards. Most of the amendments are effective for annual periods beginning on or after January 1, 2009, with earlier adoption permitted. AEGON is currently evaluating the potential impact of these amendments on equity and income.
In addition to the above, the following standards, amendments to standards and interpretations have been published and are mandatory for accounting periods beginning on or after January 1, 2009 or later periods but are not relevant for the Group’s operations:
Amendments to IAS 32 and IAS 1 Puttable financial
instruments and obligations arising on liquidation; Amendments to IFRS 1 and IAS 27 Cost of an investment
in a subsidiary;
IFRIC 13 Customer loyalty programmes;
IFRIC 15 Agreements for the construction of real estate
1;IFRIC 17 Distributions of non-cash assets to owners
1;IFRIC 18 Transfers of assets from customers
1;IFRS 1 (revised) First time adoption of IFRS
1.note 2.2 CHAnGes in RePORTinG note 2.2.1 CHAnGes in PResenTATiOn
As of January 1, 2008, AEGON reclassified, on the face of its balance sheet, real estate for own use from Investments general account and Investments for account of policyholders to Other assets and receivables. In addition AEGON reclassified cash flows from real estate held for own use from cash flows from operating activities to investing activities, to the extent that such cash flows relate to real estate that is occupied by AEGON’s own employees. The comparative 2007 and 2006 information has been reclassified accordingly. This change reduced Investments general account by EUR 329 million and Investments for account of policyholders by EUR 141 million with an offsetting increase in Other assets and receivables of EUR 471 million in 2007. In the cash flow statement, net cash flows from operating activities increased by EUR 16 million in 2007 and EUR 29 million in 2006. The net cash flows from investing activities decreased by the same amounts.
As of January 1, 2008, AEGON’s treasury shares are included in Retained earnings instead of Share capital. The comparative 2007 and 2006 information has been reclassified accordingly. This change increased Share capital with EUR 2,053 million and EUR 787 million at December 31, 2007 and December 31, 2006 respectively. The Retained earnings decreased by the same amounts.