content_image/88418.jpg
The principal exchange rates are summarized in the following table: 

<img src='content_image/88418.jpg'>

## Recognition principles 

Financial assets or financial liabilities are recognized in the balance sheet from the time at which the recognizing Group enterprise be- comes a contractual partner to the contract governing the financial in- strument. A financial asset is derecognized when the enterprise loses control of the contractual rights that characterize the financial asset. Financial liabilities are derecognized when the liability is amortized, settled, discharged, cancelled or expired. 

## Use of estimates and assumptions 

The preparation of consolidated financial statements requires the Group to make estimates and assumptions that affect items re- ported in the consolidated balance sheet and income statement, and under contingent liabilities. The actual values may differ from those reported. The most important of such items are the reserve for loss and loss adjustment expenses, the aggregate policy re- serves, deferred acquisition costs and the loan loss allowance. In addition, management makes certain assumptions in connection with the impairment reviews of goodwill, brand names and deferred tax assets. 

## Supplementary information on assets 

## Intangible assets 

Goodwill represents the difference between the purchase price of subsidiaries and the Group’s proportionate share of their net assets valued at the current value of all assets and liabilities at the time of acquisition. Minority interests are generally valued at amortized his- torical cost. Goodwill is amortized over its useful life, which is nor- mally 10 years for property and casualty insurance enterprises, 20 years for life and health insurance enterprises, 10 years for banks, and 20 years for asset management companies. 

Under current IAS rules, activated goodwill must be amortized on a regular basis over the useful life of the asset. In addition, we conduct an annual impairment review of activated goodwill. In the first step of the goodwill impairment review, the present value of a unit is compared to its balance sheet value, including goodwill. If the present value is higher, there is no impairment of goodwill. If the ba- lance sheet value is higher, the present value of the goodwill must be determined in a second step and the goodwill must be written down to this value. 

Present value of future profits (PVFP) is the present value of net cash flows anticipated in the future from insurance policies written at the point in time of first-time consolidation after the life/health insu- rance portfolio was purchased. Expected future cash flows used in de- termining the PVFP of life/health insurance portfolios are based on actuarial determinations of future premium income, mortality, disease and surrender probabilities, in addition to underwriting costs and re- turns on assets that were invested in order to be able to meet the obli- gations arising under the respective insurance contracts. The discount rate used to determine the PVFP corresponds to the opportunity costs for the risk capital used. In determining the discount rate applied, the Allianz Group considers the magnitude of the risks associated with the type of business being acquired, actuarial factors described above, cost of capital available to the Allianz Group to fund the acquisition and compatibility with other Allianz Group activities that may favorably af- fect future profits. 

