Preliminary results - 12 months ended 31 December 2005
1. Basis of preparation – IFRS basis
- From 2005, all European Union listed companies are required to prepare consolidated financial statements using International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB) and endorsed by the European Union. Accordingly, the results for the year ended 31 December 2005 have been prepared in accordance with IFRS accounting policies and have been taken from the Group's Annual Report and Accounts. The Group's previously reported 2004 consolidated financial statements have accordingly been restated to comply with IFRS, with the date of transition to IFRS being 1 January 2004 as detailed in the market release of 5 July 2005, "Impact of International Financial Reporting Standards on the results for 31 December 2004".
The preliminary announcement has been prepared in accordance with the IFRS applicable at 31 December 2005. The IASB issued amendments to IAS 19, Employee Benefits and IAS 39, The Fair Value Option, in December 2004 and June 2005 respectively and its Interpretation Committee (IFRIC) issued IFRIC Interpretation 4, Determining whether an Arrangement contains a Lease, in December 2004. The requirements are applicable for accounting periods beginning on or after 1 January 2006, but the Group has decided to adopt them early and reflect their impact within this preliminary announcement. - In line with the requirements of International Financial Reporting Standard 1, First-Time Adoption of International Financial Reporting Standards (IFRS 1), Aviva has applied the Group's accounting policies under IFRS retrospectively at the date of transition, being 1 January 2004, with the exception of a number of permitted exemptions. These are detailed in the market release of 5 July 2005, "Impact of International Financial Reporting Standards on the results for 31 December 2004".
- Aviva has chosen to revisit its longer-term investment return (LTIR) methodology from 2005 as part of a discretionary change not required by IFRS. This change in accounting policy was adopted and detailed in the market release of 5 July "Impact of International Financial Reporting Standards on the results for 31 December 2004".
- The requirements of International Financial Reporting Standard 5, Non-current Assets Held for Sale and Discontinued Operations, have been applied prospectively from 1 January 2005.
- Financial Reporting Standard 27, Life Assurance (FRS 27) was issued by the UK's Accounting Standards Board (ASB) in December 2004, following the Penrose inquiry. Aviva, along with other major insurance companies and the Association of British Insurers (ABI), has signed a Memorandum of Understanding (MoU) with the ASB relating to FRS 27. Under this MoU, Aviva has agreed to adopt voluntarily in full the standard from 2005 within the Group's IFRS financial statements.
Within FRS 27, the ASB acknowledged the difficulty of applying the requirements retrospectively and indeed it is the Group's view that it would be impractical to do so in accordance with IAS 8. This has no impact on net assets or profit for the year ended 31 December 2004, as the adjustments reflect changes in balance sheet presentation between the unallocated divisible surplus and insurance liabilities. Therefore, only the balance sheet at 31 December 2004 has been restated for the impact of FRS 27. No adjustments have been made, nor are any required, to the balance sheet at 1 January 2004 or the income statement for the year ended 31 December 2004. - In accordance with Phase I of International Financial Reporting Standard 4, Insurance Contracts (IFRS 4), the Group has applied existing accounting practices for insurance and participating investment contracts, modified as appropriate to comply with the IFRS framework and applicable standards.
- Items included in the financial statements of each of the Group's entities are measured in the currency of the primary economic environment in which that entity operates (the "functional currency"). The consolidated financial statements are stated in sterling, which is the Company's functional and presentation currency. Unless otherwise noted, the amounts shown in the financial statements are in millions of pounds sterling (£m). As supplementary information, consolidated financial information is also presented in Euros.
- The preliminary announcement for the year to 31 December 2005 does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The results on an IFRS basis for the full years 2004 and 2005 have been audited by Ernst & Young LLP. The auditors have reported on the 2004 and 2005 accounts and their reports were unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. The Group's Report and Accounts incorporating the restated 2004 financial information will be available from 29 March 2006. The Group’s 2004 Report and Accounts, prepared under the previous accounting basis, have been filed with the Registrar of Companies.
