Page 91 - Neal and Massy Holdings Annual Report 2012

89 forward focused
2 Summary Of Significant Accounting Policies (continued)
2.15 Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from
suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal
operating cycle of the business if longer). If not, they are presented as non-current liabilities.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method.
2.16 Insurance
a) Insurance and reinsurance contracts
Insurance and reinsurance contracts are defined as those containing significant insurance risk at the inception of the
contract, or those where at the inception of the contract there is a scenario with commercial substance where the level
of insurance risk may be significant. The significance of insurance risk is dependent on both the probability of an insured
event and the magnitude of its potential effect. Once a contract has been classified as an insurance contract, it remains
an insurance contract for the remainder of its lifetime, even if the insurance risk reduces significantly during the period.
In the normal course of business, the Group seeks to reduce the losses to which it is exposed that may cause
unfavourable underwriting results by re-insuring a certain level of risk with reinsurance companies. Reinsurance premiums
are accounted for on a basis consistent with that used in accounting for the original policies issued and the terms of the
reinsurance contracts. The Group may receive a ceding commission in connection with ceded reinsurance, which is earned
as incurred.
Reinsurance contracts ceded do not relieve the Group from its obligations to policyholders. The Group remains liable to
its policyholders for the portion re-insured, to the extent that the reinsurers do not meet the obligations assumed under
the reinsurance agreements.
b) Amounts receivable from reinsurance companies
Included in accounts receivable on the statement of financial position, are amounts receivable from reinsurance companies,
which consist primarily of amounts due in respect of ceded insurance liabilities. Recoverable amounts are estimated in
a manner consistent with the outstanding claims reserve or settled claims associated with the re-insured policies and in
accordance with the relevant reinsurance contract.
If amounts receivable from reinsurance companies are impaired, the Group reduces the carrying amount accordingly
and recognises an impairment loss in the consolidated income statement. A reinsurance asset is impaired if there is
objective evidence that the Group may not receive all, or part, of the amounts due to it under the terms of the reinsurance
contract.