Overview
Our Business review for the period to 31 December 2008 has been prepared in line with the Companies Act 2006 and the Disclosure and Transparency Rules (DTR) issued by the Financial Services Authority (FSA). Under Section 417 of the Companies Act 2006 and DTR 4.1.8, the Group is required to provide a fair review of the business and a description of the principal risks and uncertainties facing the Group. Principal uncertainties are detailed in Group overview. Principal risks are detailed in Risk management and Note 39 of the IFRS Group financial statements section of this report. To provide clear and helpful information, we have also considered the voluntary best practice principles of the Reporting statement: Operating and Financial Review (OFR) issued by the Accounting Standards Board (ASB).
The Group’s financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), as endorsed by the European Union (EU). However, our Board believes that non-Generally Accepted Accounting Principles (GAAP) measures, which we have used in the Business review, together with other measures that are calculated in accordance with IFRS, are useful for both management and investors and make it easier to understand our Group’s performance.
The most important non-GAAP measures in the Business review include European Embedded Value (EEV) information and IFRS underlying profit.
All non-GAAP measures should be read together with the Group’s IFRS income statement, balance sheet and cash flow statement which are presented in the IFRS Group financial statements section of this report.
EEV and IFRS reporting
The financial results are prepared on both an EEV basis and an IFRS basis. All EU listed companies are required to prepare consolidated financial statements using IFRS issued by the International Accounting Standards Board (IASB) as endorsed by the EU. EEV measures the net assets of the business plus the present value of future profits expected to arise from in-force long-term life assurance and pensions policies and is designed to give a more accurate reflection of the performance of long-term savings business. The EEV basis has been determined in accordance with the EEV Principles and Guidance issued in May 2004 and October 2005 by the CFO forum. The CFO forum represents the chief financial officers of major European insurers, including Standard Life. EEV methodology has been applied to ‘covered’ business, which mainly comprises the Group’s life and pensions business. Non-covered business is reported on an IFRS basis. The EEV financial results in EEV - Group and in the EEV financial statements section of this report have been prepared in accordance with the EEV methodology applied by the Group in Note 16 of the EEV financial statements section of this report for 2008, and in the relevant EEV methodology note included in the 2007 Annual Report and Accounts in respect of the comparative period. The IFRS financial results in IFRS - Group and in the IFRS Group financial statements section of this report have been prepared on the basis of the IFRS accounting policies applied by the Group in the IFRS Group financial statements section of this report.
The segmental analysis of IFRS underlying profit before tax presents profit before tax attributable to equity holders adjusted for non-operating items. The 2008 EEV consolidated income statement presents EEV profit showing both operating and non-operating items. In doing so, the Directors believe they are presenting a more meaningful indication of the underlying business performance of the Group. The 2008 EEV consolidated income statement and the 2008 IFRS reconciliation of Group underlying profit to profit before tax are presented in the relevant financial statements sections of this report.
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