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In determining whether Aegon has power the following has been considered: 

■ Is the asset manager external or internal (i.e. an Aegon subsidiary); 

■ Is the investment mandate broad or narrow; 

■ Does the policyholder have legal rights to the separate assets in the investment vehicle (e.g. policyholders could have the voting rights related to these investments); 

■ The governance structure, such as an independent board of directors, representing the policyholders, which has substantive rights (e.g. to elect or remove the asset manager); and 

■ Rights held by other parties (e.g. voting rights of policyholders that are substantive or not). 

If the above assessment indicates that Aegon has power, it has been assessed whether Aegon has exposure or rights to variability of returns. The following items were assessed: 

■ General account investment of Aegon; 

■ Aegon’s investment held for policyholder; 

■ Guarantees provided by Aegon on return of policyholders in specific investment vehicles; 

■ Fees dependent on fund value (including, but not limited to, asset management fees); and 

■ Fees dependent on performance of the fund (including, but not limited to, performance fees). 

For some investment funds Aegon concludes that Aegon is an agent and thus does not control those investment funds. In particular, for some separate accounts, Aegon concluded that the independent board of directors has substantive rights and therefore Aegon does not have power over these separate accounts and in that case Aegon acts as an agent. 

For some limited partnerships, determining whether Aegon has control over these entities is dependent on whether Aegon is a limited partner, general partner and whether other parties have substantive removal rights. The conclusion differs per situation and judgment is applied on the substantiveness of the removal rights and on the magnitude of the exposure to variable returns. 

## Structured entities 

A structured entity is defined in IFRS 12 as “An entity that has been designed so that voting rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements.” In these instances the tests and indicators to assess control provided by IFRS 10 have more focus on the purpose and design of the investee (with relation to the relevant activities that most significantly affect the structured entity) and the exposure to variable returns, which for structured entities lies in interests through e.g. derivatives, and will not be focused on entities that are controlled by voting rights. 

Aegon concluded for several structured entities that the Group controls those investees. In particular the implementation of IFRS 10 resulted in a change in consolidation conclusion for a structured entity, as Aegon concluded it has control over that structured entity. Aegon has been involved in the design of certain mortgage backed securitization deals and Aegon also has the ability to use its power to affect the amount of the investee’s returns. Furthermore, Aegon fully services the investees and can therefore influence the defaults of the mortgage portfolios. In addition, for several of these securitization deals the majority of risks are maintained by Aegon. These factors contributed to the conclusion that Aegon has control. Restatements due to the implementation of IFRS 10 are disclosed in note 2.1.2. 

## Determination of fair value and fair value hierarchy 

The following is a description of Aegon’s methods of determining fair value, and a quantification of its exposure to assets and liabilities measured at fair value. 

Fair value is defined as the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions (i.e. an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability). A fair value measurement assumes 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. 

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