Page 128 - Suncorp_Review

126

Notes to the consolidated fnancial statements (continued)

for the year ended 30 June 2011

33. Signifcant accounting policies (continued)

33.1 Signifcant accounting policies applicable to all Group entities (continued)

33.1.1 Basis of consolidation (continued)

(b) Special purpose entities and securitisation

Special purpose entities (SPEs) are entities that are created to accomplish a narrow and well-defned objective such as the securitisation of particular assets, or the execution of a specifc borrowing or lending transaction. The Suncorp Group has established a number of SPEs for trading and investment purposes. A SPE is consolidated if, based on an evaluation of the substance of its relationship with the Suncorp Group and the SPE’s risks and rewards, the Suncorp Group concludes that it controls the SPE.

Securitisation

The Suncorp Group conducts a loan securitisation program whereby housing mortgage loans are packaged and sold as securities to the Apollo Trusts (Trusts). Securitised loans are recognised in the Suncorp Group’s fnancial statements as the Suncorp Group is entitled to any residual income of the program after all payments due to investors and associated costs of the program have been met.

The Trusts fund their purchase of the loans by issuing foating-rate pass-through debt securities. These are represented as securitisation liabilities of the Suncorp Group. The Suncorp Group does not stand behind the capital value or the performance of the securities or the assets of the Trusts; and it does not guarantee the payment of interest or the repayment of principal due on the securities. The loans subject to the securitisation program have been pledged as security for the securities issued by the Trusts. The Suncorp Group is not obliged to support any losses that may be suffered by the investors and does not intend to provide such support.

Statutory insurance funds

The Suncorp Group’s General Insurance entities are licensed to maintain statutory insurance funds for external clients. The application of the statutory funds by the licensed entities is restricted to the collection of premiums and the payment of claims, related expenses and other payments authorised under the relevant Acts. The licensed entities are not liable for any defciency in the funds, or entitled to any surplus. For these reasons, the directors are of the opinion that the subsidiaries do not have control nor have the capacity to control the statutory funds. Therefore, the statutory funds are not consolidated into the Suncorp Group’s fnancial statements. (c) Non-controlling interests and managed funds units on issue

Non-controlling interests and managed funds units on issue are recognised when the Suncorp Group does not hold 100% of the shares or units in a subsidiary. They represent the external equity or liability interests in non-wholly owned subsidiaries of the Suncorp Group. Where shares or units issued are classifed as equity in the subsidiary, non-controlling interests are recognised as equity. Where shares or units issued are classifed as a liability in the subsidiary (e.g. investment trusts), managed funds units on issue are recognised as a liability.

(d) Associates and joint venture entities (equity accounted investees)

Associates are those entities in which the Suncorp Group has signifcant infuence, but not control, over the fnancial and operating policies. Joint venture entities are those entities over which the Suncorp Group has joint control, established by contractual agreement and requiring unanimous consent for strategic fnancial and operating decisions. These investments are accounted for using the equity method. Interests are initially recognised at cost and adjusted to recognise the Suncorp Group’s share of the proft or loss after the date of acquisition. For investments in associates, if the Suncorp Group’s share of losses exceeds its investment, the carrying amount is reduced to nil and recognition of further losses is discontinued.

Investments in equity-accounted investees are assessed for impairment each reporting date and are carried at the lower of the equity-accounted amount and recoverable amount. (e) Jointly controlled assets

Jointly controlled assets are those assets in which the Suncorp Group has joint control. The Suncorp Group’s interests are accounted for by including the Suncorp Group’s share of the jointly controlled assets (classifed according to the nature of the assets rather than as an investment), liabilities and expenses incurred, and income from the sale or use of jointly controlled assets. (f) Joint venture operations

Joint venture operations are those operations in which the Suncorp Group has joint control. They are brought to account by recognising the assets the Suncorp Group controls, the liabilities that it incurs, the expenses it incurs and its share of income that is earned by the joint venture operations.

33.1.2 Business combinations

The acquisition method of accounting is used to account for business combinations by the Suncorp Group.

The cost of an acquisition is measured as the fair value of the assets transferred, liabilities incurred, and equity instruments issued by the Suncorp Group at the acquisition date. Acquisition-related costs are expensed in the period in which they are incurred. Where equity instruments are issued in an acquisition, their value is the published market price at the acquisition date. Transaction costs arising on the issue of equity instruments are recognised directly in equity. The acquiree’s identifable assets acquired, liabilities assumed, contingent liabilities, and any non-controlling interests are measured at their fair values at the acquisition date. If the consideration transferred and any non-controlling interest in the acquiree is greater than the fair value of the net amounts of the identifable assets acquired and liabilities assumed, the excess is recorded as goodwill; otherwise, the difference is recognised immediately in proft or loss after a reassessment of the identifcation and measurement of the net assets acquired.