01 02 03 Financial Statements 04 3. Summary of significant accounting policies continued Deferred acquisition costs Deferred acquisition costs (“DAC”) are capitalised costs related to the issuance of insurance policies. They consist of commissions paid to agents, brokers and some employees. They are amortised on a straight line basis over the life of the contract. Fair value measurement At each reporting date, the Group revalues its derivative financial instruments. The Group also estimates fair value of its land and office buildings and hospitals and clinics according to its accounting policy. Fair values of financial instruments measured at amortised cost are disclosed in Note 40. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: • in the principal market for the asset or liability; or • in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. Property and equipment Property and equipment except for land and office buildings and hospitals and clinics are carried at cost less accumulated depreciation and any accumulated impairment in value. Such cost includes the cost of replacing part of equipment when that cost is incurred if the recognition criteria are met. Hospitals and clinics category comprises buildings and related land where referral hospitals, community hospitals and ambulatory clinics are placed. The carrying values of property and equipment classes carried at cost are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. Impairment losses are recognised in the consolidated profit or loss as other operating expense. Following initial recognition at cost, land and office buildings and hospitals and clinics are carried at a revalued amount, which is the fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Valuations are performed frequently enough (market value changes are monitored at least once in a year and revaluation is done at least once in every three years) to ensure that the fair value of a revalued asset does not differ materially from its carrying amount. If an asset’s carrying amount is increased as a result of a revaluation, the increase shall be recognised in other comprehensive income and accumulated in equity in other reserves. However, the increase shall be recognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss. If an asset’s carrying amount is decreased as a result of a revaluation, the decrease shall be recognised in profit or loss. However, the decrease shall be recognised in other comprehensive income to the extent of any credit balance existing in the revaluation surplus in respect of that asset. The decrease recognised in other comprehensive income reduces the amount accumulated in other reserves in equity. Accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings. Depreciation of an asset begins when it is available for use. Depreciation is calculated on a straight line basis over the following estimated useful lives: Years Office buildings 100 Hospitals and clinics 100 Leasehold improvements 10 Furniture and fixtures 5-10 Medical equipment 5-10 Computers 5 Motor vehicles 5 The asset’s residual value and useful life are reviewed, and adjusted as appropriate, at each financial year-end. Costs related to repairs and renewals are charged when incurred and included in other operating expenses unless they qualify for capitalisation. An item of property and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognising of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the consolidated profit or loss in the period the asset is derecognised. An asset under construction comprises costs directly related to construction of property and equipment including an appropriate allocation of directly attributable variable and fixed overheads that are required to bring an asset to location and position necessary for intended use by the management. Depreciation of these assets, on the same basis as similar property assets, commences when the assets are ready for use. Leasehold improvements are depreciated over the shorter of ten years or the life of the related leased asset. The asset’s residual value and useful life are reviewed, and adjusted as appropriate, at each financial year-end. 133