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Allianz Annual Report 2013

D Consolidated Financial Statements 127 Consolidated Balance Sheets 128 Consolidated Income Statements 129 Consolidated Statements of Comprehensive Income 130 Consolidated Statements of Changes in Equity 131 Consolidated Statements of Cash Flows 134 Notes to the Consolidated Financial Statements Annual Report 2013    Allianz Group 135 Investments in associates and joint ventures In general, if the ­Allianz Group holds 20 % or more of voting power in an investee but does not control the investee, it assumes to exercise significant influence, unless it can be clearly demonstrated that this is not the case. Investments in associates over which the ­Allianz Group exercises significant influence are generally accounted for using the equity method. Joint ventures are entities over which the ­Allianz Group and one or more other parties have joint control. Joint ventures are generally accounted for using the equity method. The ­Allianz Group accounts for all material investments in asso- ciates on a time lag of no more than three months. Income from investments in associates and joint ventures, which reflects the earn- ings rather than the distributions of the associate or jointly con- trolled entity, is included in interest and similar income. Profits or lossesresultingfromtransactionsbetweenthe­AllianzGroupandthe associate or joint venture are eliminated to the extent of the interest in the associate or joint venture. Accounting policies of associates and joint ventures have been adjusted where necessary to ensure consistency with the accounting policies adopted by the ­Allianz Group. FOREIGN CURRENCY TRANSLATION Translation from any foreign currency into functional currency The individual financial statements of each of the ­Allianz Group’s subsidiaries are prepared in the prevailing currency in the primary economic environment where the subsidiary conducts its ordinary activities (its functional currency). Transactions recorded in curren- cies other than the functional currency (foreign currencies) are recorded at the exchange rate prevailing on the date of the trans­ action. At the balance sheet date, monetary assets and liabilities denominated in foreign currencies are translated into the functional currency using the closing exchange rate. Non-monetary assets and liabilities denominated in foreign currencies that are measured at historical cost are translated at historical rates and non-monetary items that are measured at fair value are translated using the closing rate. Foreign currency gains and losses arising from foreign currency transactions are reported in income from financial assets and liabil- ities carried at fair value through income (net), except when the gain or loss on a non-monetary item measured at fair value is recognized in other comprehensive income. In this case, any foreign exchange component of that gain or loss is also recognized in other compre- hensive income. Translation to the presentation currency For the purposes of the consolidated financial statements, the results and financial position of each of the ­Allianz Group’s subsidiaries are expressed in Euro, the presentation currency of the ­Allianz Group. Assets and liabilities of subsidiaries not reporting in Euro are trans- lated at the closing rate on the balance sheet date and income and expenses are translated at the quarterly average exchange rate. Any foreign currency translation differences, including those arising from the equity method, are recorded in other comprehensive income. PRINCIPLES OF ACCOUNTING FOR FINANCIAL ASSETS Recognition Financial assets are generally recognized and derecognized on the trade date, i.e. when the ­Allianz Group commits to purchase or sell securities or incur a liability. Financial instruments are initially recognized at fair value plus, in the case of financial instruments not carried at fair value through income, directly attributable transaction costs. Offsetting Financial assets and liabilities are offset and the net amount pre- sented in the balance sheet only when there is a legally enforceable right to offset the recognized amounts and there is an intention to either settle on a net basis, or to realize the asset and settle the liabil- ity simultaneously. Derecognition A financial asset is derecognized when the contractual rights to the cash flows from the financial asset expire or the ­Allianz Group trans- fers the asset and substantially all of the risks and rewards of owner- ship. A financial liability is derecognized when it is extinguished. Securities lending and repurchase agreements The ­Allianz Group enters into securities lending transactions and repurchase agreements. If all of the risks and rewards of the securi- ties remain substantially with the ­Allianz Group these securities are not derecognized. Cash received as collateral in securities lending transactions is recognized together with a corresponding liability, whereas securities received as collateral are not recognized under the terms of the agreements if risks and rewards have not been trans- ferred. For repurchase agreements, the proceeds received from the sale are reported under liabilities to banks or customers. Interest expen- ses from repo transactions are accrued over the duration of the agree- ments and reported in interest expenses. If for reverse repo trans­ actions all of the risks and rewards of the securities remain substantially with the counterparty over the entire lifetime of the agreement of the transaction, the securities concerned are not recog- nized as assets. The amounts of cash disbursed are recorded under loans and advances to banks and customers. Interest income on reverse repo agreements is accrued over the duration of the agree- ments and is reported in interest and similar income.

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