NTUC Income AR 2019

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (c) Insurance contracts (continued) (vi) Liability adequacy tests At each reporting date, liability adequacy tests are performed to assess the adequacy of the insurance liabilities estimates. Current best estimates of future contractual cash flows, expected future claims handling, acquisition and administration costs, if any, are projected at best estimate assumptions, and discounted at rates that are close to the Group prospective investment return. Any deficiency is charged to profit or loss in the statement of comprehensive income. (d) Revenue Gross premium The accounting policy for the recognition of gross premium is disclosed in Note 2(c)(i). Fee and other income Fee and other income comprises reinsurance commission income (including reinsurance profit commission income) and management and other fees. Reinsurance commission income is recognised as revenue on a basis that is consistent with the recognition of the costs incurred on the acquisition of underlying insurance contracts (see Note 2(c)). Reinsurance profit commission income is recognised based on the terms of the underlying reinsurance contract, and when the amount of revenue and related cost of the reinsurance transaction can be reliably measured. Management and other fees comprise fund management fees, mortality fees, policy fees and fund switch fees relating to Investment-Linked Fund. Management and other fees are recognised as revenue on a straight-line basis over the period the service is provided. Investment income Investment income comprises of rental income from investment properties, dividend and interest income from financial assets and interest income on loans and bank deposits, and gains or losses on sale of investments. Rental income from investment properties is recognised as revenue on a straight-line basis over the term of the operating lease. Interest income is recognised using the effective interest method. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument and continues unwinding the discount as interest income. Dividend income is recognised when the right to receive payment is established. Gains or losses on sale of investments are derived from the difference between net sales proceeds and the purchase or amortised cost. They are recognised on trade date. ANNUAL REPORT 2019 57