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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 137 orexercised,orwhenthe­AllianzGroupdecidesthathedgeaccounting is no longer appropriate. Derivative financial instruments designated in hedge account- ing relationships are included in the line item other assets and liabil- ities. Freestanding derivatives are included in the line item financial assets or liabilities held for trading. For further information on deriv- atives, please refer to note 43. Disclosures relating to financial assets Thefollowingtablesummarizestherelationshipbetweenthebalance sheet positions and the classes of financial instruments according to IFRS 7. The balance sheet positions are the same as the IAS 39 catego- ries except when noted in parentheses. Balance sheet line items, IAS 39 categories and IFRS 7 classes of financial instruments Measurement basis FINANCIAL ASSETS Cash and cash equivalents Nominal value Financial assets carried at fair value through income Financial assets held for trading Fair value Financial assets designated at fair value through income Fair value Investments Available-for-sale investments Fair value Held-to-maturity investments Amortized cost Loans and advances to banks and customers (Loans and receivables) Amortized cost Financial assets for unit-linked contracts Fair value Other assets Derivative financial instruments used for hedging that meet the criteria for hedge accounting and firm commitments Fair value FINANCIAL LIABILITIES Financial liabilities carried at fair value through income Financial liabilities held for trading Fair value Financial liabilities designated at fair value through income Fair value Liabilities to banks and customers (Other liabilities) Amortized cost Reserves for insurance and investment contracts Non-unit-linked investment contracts Amortized cost Financial liabilities for unit-linked contracts Fair value Other liabilities Derivative financial instruments used for hedging that meet the criteria for hedge accounting and firm commitments Fair value Financial liabilities for puttable equity instruments Redemption amount Certificated liabilities (Other liabilities) Amortized cost Subordinated liabilities (Other liabilities) Amortized cost OFF-BALANCE SHEET Financial guarantees Nominal value Irrevocable loan commitments Nominal value Please refer to note 44 for details on fair value measurement and fur- ther disclosures under IFRS 7. Please refer to note 3, where the pro- cesses and controls for ensuring an appropriate use of estimates and assumptions are explained. CASH AND CASH EQUIVALENTS Cash and cash equivalents include balances with banks payable on demand, balances with central banks, cash on hand, treasury bills to the extent they are not included in financial assets held for trading, as well as checks and bills of exchange which are eligible for refinanc- ing at central banks, subject to a maximum term of three months from the date of acquisition. FINANCIAL ASSETS AND LIABILITIES CARRIED AT FAIR VALUE THROUGH INCOME Financial assets and liabilities carried at fair value through income include financial assets and liabilities held for trading and financial assets and liabilities designated at fair value through income. Finan- cial assets and liabilities held for trading consist of debt and equity securities that have been principally acquired for the purpose of gen- erating a profit from short-term fluctuations in price or for the pur- pose of selling in the near future as well as of derivative financial instruments, which include bifurcated embedded derivatives of hy- brid financial instruments and of insurance contracts. Financial assets and liabilities are designated at fair value through income to eliminate or significantly reduce an accounting mismatch. Subsidiaries must reach out to the Group Accounting and Reporting department for approval before designating any financial asset or liability as at fair value through income. INVESTMENTS Available-for-sale investments Available-for-sale investments comprise debt and equity securities that are designated as available-for-sale or are not classified as held- to-maturity, loans and advances, or financial assets carried at fair value through income. Available-for-sale investments are initially recognized and subsequently measured at fair value. Unrealized gains and losses, which are the difference between fair value and cost or amortized cost, are recognized as a separate component of other comprehensive income, net of deferred taxes and the latent reserve for premium refunds to the extent that policyholders will participate in such gains and losses on the basis of statutory or contractual reg- ulations when they are realized. When an available-for-sale invest- ment is derecognized or determined to be impaired, the cumulative gain or loss previously recorded in other comprehensive income is transferred and recognized in the consolidated income statement. Realized gains and losses on securities are generally determined by applying the average cost method at the subsidiary level.

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