IV. Rounding
Amounts in this financial report have been rounded to the nearest million dollars, unless otherwise stated. The Company is the kind of
company referred to in the class order 98/100 dated 10 July 1998 issued by the Australian Securities & Investments Commission. All
rounding has been conducted in accordance with that class order.
C. PRINCIPLES OF CONSOLIDATION
I. Subsidiaries
Consolidation is the incorporation of the assets and liabilities of the Parent and all subsidiaries as at the reporting date and the results
of the Parent and all subsidiaries for the year then ended as if they had operated as a single entity. The balances and effects of
intragroup transactions are eliminated from the consolidation. Subsidiaries are those entities controlled by the Parent. An investor
controls an investee if and only if the investor has power over the investee; exposure, or rights, to variable returns from its involvement
with the investee; and the ability to use its power over the investee to affect the amount of the investor's returns. Where an entity
either began or ceased to be controlled during a financial reporting year, the results are included only from the date control
commenced or up to the date control ceased.
The financial information of all subsidiaries is prepared for consolidation for the same reporting year as the Parent, using consistent
accounting policies. The financial statements of entities operating outside Australia that maintain accounting records in accordance
with overseas accounting principles are adjusted where necessary to comply with the significant accounting policies of the
Consolidated entity.
Where a subsidiary is less than wholly owned, the equity interests held by external parties are presented separately as non-controlling
interests on the consolidated balance sheet, except where the subsidiary is a trust or similar entity for which the third party interest is
presented separately on the consolidated balance sheet as a liability (this is the case with the IAG Asset Management Wholesale
Trusts that are subsidiaries, refer to the details of subsidiaries note).
II. Associates
Associates, those entities over which significant influence is exercised but not joint control, and which are not intended for sale in the
near future, are accounted for using the equity accounting method. Significant influence is generally accompanying a shareholding of
between 20% and 50% of the voting rights of an entity, but can also arise where less than 20% is held through active involvement and
influence of policy decisions affecting the entity. The investment in associates is initially recognised at cost (fair value of consideration
provided plus directly attributable costs) and is subsequently adjusted for the post-acquisition change in the investor’s share of net
assets of the investee. The investor’s share of the profit or loss of the investee is included in the profit or loss of the Consolidated
entity and disclosed as a separate line in the statement of comprehensive income. Distributions received reduce the carrying amount
of the investment and are not included as dividend revenue of the Consolidated entity. Movements in the total equity of the investee
that are not recognised in the profit or loss of the investee are recognised directly in equity of the Consolidated entity and disclosed in
the statement of changes in equity. The investments are reviewed annually for impairment.
Where an entity either began or ceased to be an associate during the current financial reporting year, the investment is equity
accounted from the date significant influence commenced or up to the date significant influence ceased.
The financial statements of associates are adjusted where necessary to comply with the significant accounting policies of the
Consolidated entity.
When the investor’s share of losses exceeds its interest in the investee, the carrying amount of the investment is reduced to nil and
recognition of further losses is discontinued except to the extent that the investor has incurred obligations or made payments, on
behalf of the investee.
III. Joint arrangement
A joint arrangement (joint operation or a joint venture) exists where parties are bound by a contractual arrangement, giving two or
more of the parties joint control of the arrangement and decisions about the relevant activities require unanimous consent of the
parties that control the arrangement collectively.
Joint control is assessed by considering rights and obligations from the contractual arrangement, as well as arrangement structure,
legal form and terms agreed. The investment in joint ventures is equity accounted from the date joint control commences during a
financial period.
SIGNIFICANT ACCOUNTING POLICIES RELATED TO GENERAL INSURANCE CONTRACTS
All of the general insurance products and reinsurance products on offer, or utilised, meet the definition of an insurance contract (a
contract under which one party, the insurer, accepts significant insurance risk from another party, the policyholder, by agreeing to
compensate the policyholder if a specified uncertain future event, the insured event, adversely affects the policyholder) and none of
the contracts contain embedded derivatives or are required to be unbundled. Insurance contracts that meet the definition of a
financial guarantee contract are accounted for as insurance contracts. This means that all of the general insurance products are
accounted for in the same manner.
D. PREMIUM REVENUE
Premium revenue comprises amounts charged to policyholders (direct premium) or other insurers (inwards reinsurance premium) for
insurance contracts. Premium includes amounts collected for levies and charges for which the amount to be paid by the insurer does
not depend on the amounts collected, such as for fire services levies in Australia, but excludes stamp duties and taxes collected on
behalf of third parties, including the goods and services tax (GST) in Australia.
44 IAG ANNUAL REPORT 2015
