Final Results - Part 4 of 7

RNS Number : 5269P

Standard Life plc

19 February 2016

 

Standard Life plc

Full year results 2015

Part 4 of 7

7. Independent auditors' report to the members of Standard Life plc

Report on the Group financial statements

Our opinion

In our opinion, Standard Life plc's Group financial statements (the "financial statements"):

·   Give a true and fair view of the state of the Group's affairs as at 31 December 2015 and of its profit and cash flows for the year then ended

·   Have been properly prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union

·   Have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the International Accounting Standards ("IAS") Regulation

What we have audited

The financial statements, included within the Annual report and accounts, comprise:

·   The consolidated statement of financial position as at 31 December 2015

·   The consolidated income statement and consolidated statement of comprehensive income for the year then ended

·   The consolidated statement of cash flows for the year then ended

·   The consolidated statement of changes in equity for the year then ended

·   The accounting policies

·   The notes to the financial statements, which include other explanatory information

We have not audited the pro forma reconciliation of consolidated operating profit for the year ended 31 December 2015 set out on page 111 which was prepared by Standard Life plc.

Certain required disclosures have been presented elsewhere in the Annual report and accounts, rather than in the notes to the financial statements. These are cross-referenced from the financial statements and are identified as audited.

The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and IFRSs as adopted by the European Union.

Our audit approach

Overview

·   Overall Group materiality of £31m represents 5% of operating profit before tax.

·   We selected 25 reporting units (as explained on page 106) on whose financial information we conducted audit procedures

·   We identified 7 of these reporting units which, in our view, required an audit of the complete financial information, either due to their size and/or their risk characteristics. These focused on the material reporting units within the Standard Life Investments and UK and Europe segments.

·   For the remaining 18 reporting units across all segments, specific audit procedures were performed on certain account balances and transactions

·   Procedures were also performed at the Group level over the Group consolidation processes.

Our areas of focus included:

·   Determination of actuarial assumptions for valuation of assets and liabilities

·   Valuation of complex financial instruments and investment property

·   New UK general ledger implementation

·   Valuation of intangible assets arising from the acquisition of Ignis

The scope of our audit and our areas of focus

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) ("ISAs (UK & Ireland)").

We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular, we looked at where the Directors made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. We also addressed the risk of management override of internal controls and the risk of fraud in revenue recognition, including evaluating

whether there was evidence of bias by the Directors that represented a risk of material misstatement due to fraud.

The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort, are identified as "areas of focus" in the table below. We have also set out how we tailored our audit to address these specific areas in order to provide an opinion on the financial statements as a whole, and any comments we make on the results of our procedures should be read in this context. This is not a complete list of all risks identified and considered by our audit.

Area of focus	How our audit addressed the area of focus
Determination of actuarial assumptions for valuation of assets and liabilities Refer to page 68 (Audit Committee report), page 117 (Critical accounting estimates and judgements), pages 164 to 171 (Accounting policies and notes).
The Directors' determination of assumptions for the valuation of life insurance contract liabilities involves complex judgements about future events, both internal and external to the business. Changes in assumptions can result in material impacts to the valuation of the liabilities. The methodology used can also have a material impact on the valuation of the insurance contract liabilities. As part of our consideration of assumptions, we gave specific focus to the annuitant mortality assumptions used in valuing life insurance contract liabilities, given the sensitivity of the Group's profit to changes in these assumptions and the level of judgement involved in setting these assumptions. Annuitant mortality assumptions are those related to the life expectancy of annuitants and the rate at which expectancy is likely to increase. These assumptions are driven by past experience and assumptions about future changes which are based on the Group's experience, together with industry standard data tables. Due to the magnitude of the balance and the estimates involved in the valuation, we also considered the assumptions used in valuing pension scheme liabilities. This included assumptions over mortality, discount and inflation rates. Due to a regulatory change in Hong Kong, which had a material impact on the valuation of the deferred acquisition costs of Standard Life's Hong Kong insurance business, we focused on the assumptions used in this valuation.	Our audit work in respect of actuarial assumptions in respect of life insurance contract liabilities included: ·   Assessing the key changes in the assumptions against regulatory and reporting requirements and industry standards ·   Obtaining audit evidence in respect of the key controls over the key actuarial models, data collection and analysis and the assumptions setting processes used by management, evaluating their design and implementation and testing their operating effectiveness ·   Benchmarking management's assumptions in the UK against over 25 of the largest life insurers in the UK which were included in PwC's independent benchmarking survey. This allowed us to compare the assumptions used relative to those used by the Group's industry peers. Specifically for annuitant mortality assumptions: ·   Evaluating the choice of the industry standard Continuous Mortality Investigation ('CMI') model against the outputs of management's internal cause of death model, wider market data from benchmarking and regulatory feedback Our audit work in respect of methodologies used in the valuation of life insurance contract liabilities included: ·   Challenging management's methodology, focusing on changes to methodology in the year, by applying our industry knowledge and experience to compare whether the methodology and / or changes are in compliance with recognised actuarial practices and regulatory and reporting requirements Our audit work in respect of actuarial assumptions in respect of pension scheme liabilities included: ·   Testing management's discount rate by creating an independent discount rate expectation based on our knowledge of the Standard Life pension scheme and other schemes of a similar nature ·   Benchmarking management's key assumptions (pensioner and non-pensioner mortality, spread between RPI and CPI and inflation rate premium) against over 50 companies which were included in PwC's independent benchmarking survey. This allowed us to compare the assumptions used relative to those used by other companies.   We determined based on our audit work that the assumptions used are in line with financial reporting requirements and industry accepted practice and reflect the nature of the value of the Group's pension scheme. Our audit work in respect of the valuation of the deferred acquisition costs of Standard Life's Hong Kong insurance business included: ·   Challenging management's assumptions by applying our industry knowledge and experience to compare whether the assumptions are in line with industry accepted practice and relevant regulatory and reporting requirements We determined that the assumptions used in the valuation appropriately reflected the change in circumstances. We determined that the impairment charge recognised in the financial statements for the year appropriately reflected the changes in assumptions.
Valuation of complex financial instruments and investment property Refer to page 68 (Audit Committee report), page 117 (Critical accounting estimates and judgements), pages 151 to 156 (Accounting policies and notes).
We focused on this area as valuation, specifically in respect of derivatives, commercial mortgages and investment property, is an area which requires the use of judgement by the Directors and/or the involvement of valuation experts. Derivative and commercial mortgage valuations require judgements because, for some instruments, quoted prices are not readily available. As such, management use models to estimate their fair value. The key judgement for derivative valuations is whether there are any changes required to the methodology of these models as a result of market practice, accounting or regulatory updates. Commercial mortgage valuations require the use of judgement over the discount rates applied to the future contractual cash flows, particularly in respect of the credit risk of the borrowers. Investment property valuations are complex as they require the selection of assumptions, such as future rental income to determine expected yields. Management engage property experts to assist in selecting these assumptions.	Our audit work in respect of the valuation of derivative assets and liabilities included: ·   Evaluating the design and testing the operational effectiveness of key controls over derivative valuations, such as controls to reperform valuations calculated by outsourced operations using independent source data ·   Understanding and assessing the models and methodology used for a sample of derivative investments across the investment portfolio, which management value using models. This included recalculating the sample of valuations using independent models and sourcing our own input data from recognised independent market data and investigating any differences found that were greater than predefined thresholds. Our audit work in respect of the valuation of commercial mortgages included: ·   Evaluating the assumptions over the credit risk of the borrowers used in formulating the discount rate for the future cash flows against our own expectations for similar borrowers ·   Our audit work in respect of the valuation of investment properties included: ·   Evaluating the assumptions used in a sample of investment property valuations by comparing a sample of the property yields used by management's property experts against published market benchmarks in order to identify any assumptions or valuations which fell outside our expected range ·   Meeting with management's property experts to establish whether the valuation approach was in accordance with our expectations based on our own experience of the investment property industry We determined that the assumptions used, and the resultant valuations of the complex financial instruments and investment property were within ranges that we consider to be acceptable.
New UK general ledger implementation Refer to page 69 (Audit Committee report)
During the year, the UK business implemented a new general ledger. The implementation involved migrating historic financial information from the old ledger to the new ledger and designing a new mapping of the policy and claims administration systems to the new general ledger and to existing reconciliation tools. We focused on this system change due to the risk of material misstatement of the financial statements arising from errors during the migration process that may remain undetected. Accordingly, we allocated a significant proportion of our resources across the year to perform audit procedures over the implementation, including the completeness and accuracy of the data migration.	Our audit work over the completeness and accuracy of the data migration included: ·   Performing independent reconciliations between the old general ledger and the new general ledger for account balances within the UK business' reporting units as at the migration date ·   Testing management's reconciliations at the year end between the new ledger and underlying source systems We determined that data had been completely and accurately migrated to the new general ledger. We also evaluated the design and tested the operational effectiveness of the post-migration IT and financial reporting control environment to establish the extent of detailed substantive testing that would be required to support our audit. To assess whether the new IT and financial reporting controls were designed and operating effectively our audit work included: ·   Testing the key controls over the transaction flows from the policy and claims administration systems to the new general ledger, for example, by testing that key automated controls functioned as designed ·   Observing the operation of system-enforced segregation of duty controls within the new general ledger ·   Obtaining details of manual journals being processed after migration and obtaining supporting evidence to assess the validity of the journal and the accuracy of the financial reporting impact ·   Performing detailed testing of key reconciliations and investigating reconciling differences ·   Obtaining the log of changes made to the system post-migration and testing the implementation of the changes along with manual intervention into the system During the implementation period management amended their approach to authorisation controls over reconciliations. As a result, we changed our audit approach and performed additional detailed testing of key reconciliations at year end. Based on the work performed we determined that the transactions and balances were mapped appropriately for financial reporting.
Valuation of identifiable intangible assets arising from the acquisition of Ignis Refer to page 68 (Audit Committee report), page 117 (Critical accounting estimates and judgements), pages 146 to 147 (Accounting policies and notes).
The Directors' valuation of intangible assets arising from business combinations involves complex judgements about forecast fund flows, discount rates and operating margins, as changes to which can have a material impact on the valuations adopted in the financial statements. We gave specific focus to the changes in assumptions used in the revaluation of the remaining customer contract intangible asset arising from the acquisition of Ignis Asset Management Limited ('Ignis') in 2014 as changes to these assumptions could lead to a material change in the valuation and result in a material impairment charge within the consolidated income statement for the year.	Our audit work in respect of the valuation of the intangible asset arising through the acquisition of Ignis included: ·   Evaluating and challenging assumptions used in forecasting fund flows. We checked that the forecasts used had been through management's internal challenge and approval process and considered the sensitivity of forecasts relative to the historical accuracy of management's forecasting. ·   Challenging the discount rate used through a comparison of the range of discount rates used in the industry, as well as company specific metrics such as the weighted average cost of capital and our assessment of the risk associated with forecast cash flows ·   Evaluating the forecast operating margins used against those experienced by the acquired business, as well as the ongoing business into which it is being integrated and our own expectation of the range of experience in the industry ·   Performing stress testing and reverse stress testing on key assumptions in the valuation model to challenge the appropriateness of management's assumptions We determined that the assumptions used in the valuation of the remaining customer contract intangible asset were appropriate to the circumstances and plans of the Group, and were within a reasonable range. We determined that the impairment charge recognised in the financial statements for the year appropriately reflected the changes in assumptions.

How we tailored the audit scope

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the geographic structure of the Group, the accounting processes and controls, and the industry in which the Group operates.

The Group consists of four segments: Standard Life Investments, UK and Europe, India and China and Other. These segments are disaggregated into reporting units. The financial statements are a consolidation of these reporting units.

In establishing the overall approach to the Group audit, we determined the type of work that needed to be performed at the reporting units by us, as the Group engagement team, or component auditors either within PricewaterhouseCoopers LLP or from other PricewaterhouseCoopers network firms operating under our instruction.

We identified 7 of the Group's reporting units which, in our view, required an audit of their complete financial information ("full scope" reporting units). These focused on the material reporting units within the Standard Life Investments and UK and Europe segments.

In addition, specific audit procedures on certain account balances and transactions were performed at a further 18 reporting units within the Group across all segments ("limited scope" reporting units).

We performed testing over the controls in place at the Group level over the Group consolidation process including the consolidation of share capital and reserves and the elimination of intercompany transactions.

Where the work was performed by component auditors, we determined the level of involvement we needed to have in the audit work performed at those reporting units to be able to conclude whether sufficient appropriate audit evidence had been obtained as a basis for our opinion on the financial statements. As a result, the Group engagement team attended management's oversight and governance meetings within Standard Life Investments as the largest of the Group's components, and visited the Germany operations as the largest reporting unit of the UK and Europe segment outside of the UK.

Materiality

The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and on the financial statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Overall Group materiality	£31m (2014: £37m).
How we determined it	5% of operating profit before tax.
Rationale for benchmark applied	In determining our materiality, we have considered financial metrics which we believe to be relevant and concluded that operating profit before tax was a relevant benchmark as it is the key performance measure reported by management and used by other stakeholders to reflect the underlying performance of the business in both its internal and external reporting to stakeholders, including shareholders and analysts.

To allocate materiality to full scope reporting units, we considered the specific risks and balances within the reporting units, as well as considering the level of materiality that would impact the individual entity's statutory financial statements as this is a focus for management when preparing their financial information. This resulted in materiality being allocated of between £25m and £10m to each of the full scope reporting units.

Having considered the coverage from the full scope reporting units, we assessed the risk of material misstatement within the limited scope reporting units and allocated materiality across in scope account balances and transactions. This resulted in allocation of between £30m and £7m.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £2m (2014: £2m) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

Going concern

Under the Listing Rules we are required to review the Directors' statement, set out on page 99, in relation to going concern. We have nothing to report having performed our review.

Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in relation to the Directors' statement about whether they considered it appropriate to adopt the going concern basis in preparing the financial statements. We have nothing material to add or to which to draw attention.

As noted in the Directors' statement, the Directors have concluded that it is appropriate to adopt the going concern basis in preparing the financial statements. The going concern basis presumes that the Group has adequate resources to remain in operation, and that the Directors intend it to do so, for at least one year from the date the financial statements were signed. As part of our audit, we have concluded that the Directors' use of the going concern basis is appropriate. However, because not all future events or conditions can be predicted, these statements are not a guarantee as to the Group's ability to continue as a going concern.

Other required reporting

Consistency of other information

Companies Act 2006 opinions
In our opinion: ·   The information given in the Strategic report and the Directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements ·   The information given in the Corporate governance statement set out on pages 56 to 74 with respect to internal control and risk management systems and about share capital structures is consistent with the financial statements
ISAs (UK & Ireland) reporting
Under ISAs (UK & Ireland) we are required to report to you if, in our opinion:
Information in the Annual report and accounts is: ·   Materially inconsistent with the information in the audited financial statements ·   Apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group acquired in the course of performing our audit ·   Otherwise misleading	We have no exceptions to report.
·   The statement given by the Directors on page 99, in accordance with provision C.1.1 of the UK Corporate Governance Code (the "Code"), that they consider the Annual report and accounts taken as a whole to be fair, balanced and understandable and provide the information necessary for members to assess the Group's performance, business model and strategy is materially inconsistent with our knowledge of the Group acquired in the course of performing our audit	We have no exceptions to report.
·   The section of the Annual report and accounts on pages 66 to 71, as required by provision C.3.8 of the Code, describing the work of the Audit Committee does not appropriately address matters communicated by us to the Audit Committee	We have no exceptions to report.

The Directors' assessment of the prospects of the Group and of the principal risks that would threaten the solvency or liquidity of the Group

Under ISAs (UK & Ireland), we are required to report to you if we have anything material to add or to draw attention to in relation to:
·   The Directors' confirmation on page 31 of the Annual report and accounts, in accordance with provision C.2.1 of the Code, that they have carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity	We have nothing material to add or to draw attention to.
·   The disclosures in the Annual report and accounts that describe those risks and explain how they are being managed or mitigated	We have nothing material to add or to draw attention to.
·   The Directors' explanation on page 31 of the Annual report and accounts, in accordance with provision C.2.2 of the Code, as to how they have assessed the prospects of the Group, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.	We have nothing material to add or to draw attention to.

Under the Listing Rules, we are required to review the Directors' statement that they have carried out a robust assessment of the principal risks facing the Group and the Directors' statement in relation to the longer-term viability of the Group. Our review was substantially less in scope than an audit and only consisted of making inquiries and considering the Directors' process supporting their statements; checking that the statements are in alignment with the relevant provisions of the Code; and considering whether the statements are consistent with the knowledge acquired by us in the course of performing our audit. We have nothing to report having performed our review.

Adequacy of information and explanations received

Under the Companies Act 2006, we are required to report to you if, in our opinion, we have not received all the information and explanations we require for our audit. We have no exceptions to report arising from this responsibility.

Directors' remuneration

Under the Companies Act 2006, we are required to report to you if, in our opinion, certain disclosures of Directors' remuneration specified by law are not made. We have no exceptions to report arising from this responsibility.

Corporate governance statement

Under the Companies Act 2006, we are required to report to you if, in our opinion, a Corporate governance statement has not been prepared by the Company. We have no exceptions to report arising from this responsibility.

Under the Listing Rules, we are required to review the part of the Corporate Governance Statement relating to ten further provisions of the Code. We have nothing to report having performed our review.

Responsibilities for the financial statements and the audit

Our responsibilities and those of the Directors

As explained more fully in the Directors' responsibility statement set out on page 99, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.

Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the Company's members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What an audit of financial statements involves

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:

·   Whether the accounting policies are appropriate to the Group's circumstances and have been consistently applied and adequately disclosed

·   The reasonableness of significant accounting estimates made by the Directors

·   The overall presentation of the financial statements

We primarily focus our work in these areas by assessing the Directors' judgements against available evidence, forming our own judgements, and evaluating the disclosures in the financial statements.

We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both.

In addition, we read all the financial and non-financial information in the Annual report and accounts to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies, we consider the implications for our report.

Other matter

We have reported separately on the Company financial statements of Standard Life plc for the year ended 31 December 2015 and on the information in the Directors' remuneration report that is described as having been audited.

Stephanie Bruce (Senior Statutory Auditor)

for and on behalf of PricewaterhouseCoopers LLP

Chartered Accountants and Statutory Auditors

Edinburgh

19 February 2016

(a)   The maintenance and integrity of the Standard Life plc website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

(b)   Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

8. Group financial statements

Consolidated income statement

For the year ended 31 December 2015

		2015	2014
	Notes	£m	£m
Revenue
Gross earned premium		2,276	2,404
Premium ceded to reinsurers		(48)	(61)
Net earned premium		2,228	2,343
Investment return	4	5,460	13,179
Fee income	5	1,120	985
Other income		84	81
Total revenue		8,892	16,588
Expenses
Claims and benefits paid		4,543	4,389
Claim recoveries from reinsurers		(514)	(533)
Net insurance benefits and claims		4,029	3,856
Change in reinsurance assets and liabilities	33	520	(60)
Change in insurance and participating contract liabilities	33	(1,693)	3,834
Change in unallocated divisible surplus	33	(117)	(71)
Change in non-participating investment contract liabilities	34	3,363	5,362
Expenses under arrangements with reinsurers	6	42	639
Administrative expenses
Restructuring and corporate transaction expenses	10	88	106
Other administrative expenses	7	1,540	1,430
Total administrative expenses		1,628	1,536
Change in liability for third party interest in consolidated funds	32	531	758
Finance costs		83	98
Total expenses		8,386	15,952
Share of profit from associates and joint ventures		43	36
Profit before tax		549	672
Tax expense attributable to policyholders' returns	11	134	250
Profit before tax expense attributable to equity holders' profits		415	422
Total tax expense	11	211	292
Less: Tax attributable to policyholders' returns		(134)	(250)
Tax expense attributable to equity holders' profits	11	77	42
Profit for the year from continuing operations		338	380
Profit for the year from discontinued operations	12	1,147	127
Profit for the year		1,485	507
Attributable to:
Equity holders of Standard Life plc
From continuing operations		276	376
From discontinued operations		1,147	127
Equity holders of Standard Life plc		1,423	503
Non-controlling interests	32	62	4
		1,485	507
Earnings per share from continuing operations
Basic (pence per share)	13	13.5	15.8
Diluted (pence per share)	13	13.4	15.7
Earnings per share
Basic (pence per share)	13	69.4	21.1
Diluted (pence per share)	13	69.1	21.0

The Notes on pages 116 to 236 are an integral part of these consolidated financial statements.

Consolidated statement of comprehensive income

For the year ended 31 December 2015

		2015	2014
	Notes	£m	£m
Profit for the year		1,485	507
Less: Profit for the year from discontinued operations	12	(1,147)	(127)
Profit for the year from continuing operations		338	380
Items that will not be reclassified subsequently to profit or loss:
Remeasurement gains on defined benefit pension plans	37	167	292
Revaluation of owner occupied property	20	4	5
Equity movements transferred to unallocated divisible surplus	31	(4)	(4)
Equity holder tax effect relating to items that will not be reclassified subsequently to profit or loss	11	-	-
Total items that will not be reclassified subsequently to profit or loss		167	293
Items that may be reclassified subsequently to profit or loss:
Fair value (losses)/gains on cash flow hedges		(1)	1
Net investment hedge		(1)	(1)
Fair value (losses)/gains on available-for-sale financial assets		(8)	27
Exchange differences on translating foreign operations		(6)	(13)
Equity movements transferred to unallocated divisible surplus	31	1	6
Share of other comprehensive income of joint ventures	30	2	4
Equity holder tax effect relating to items that may be reclassified subsequently to profit or loss	11	2	(6)
Total items that may be reclassified subsequently to profit or loss		(11)	18
Other comprehensive income for the year from continuing operations		156	311
Other comprehensive income for the year from discontinued operations		(187)	(18)
Total other comprehensive income for the year		(31)	293
Profit for the year from discontinued operations	12	1,147	127
Total comprehensive income for the year		1,454	800
Attributable to:
Equity holders of Standard Life plc
From continuing operations		432	687
From discontinued operations		960	109
Non-controlling interests
From continuing operations		62	4
		1,454	800

The Notes on pages 116 to 236 are an integral part of these consolidated financial statements.

Pro forma reconciliation of consolidated operating profit to profit for the year

For the year ended 31 December 2015

		2015			2014
		Continuing operations	Discontinued operations	Total	Continuing operations	Discontinued operations	Total
	Notes	£m	£m	£m	£m	£m	£m
Operating profit before tax
Standard Life Investments		342	-	342	257	4	261
UK and Europe		357	-	357	390	-	390
Canada		-	5	5	-	132	132
India and China1		27	(2)	25	23	(9)	14
Other		(61)	-	(61)	(62)	-	(62)
Operating profit before tax	2	665	3	668	608	127	735
Adjusted for the following items
Short-term fluctuations in investment return and economic assumption changes	14	(63)	63	-	17	71	88
Restructuring and corporate transaction expenses	10	(115)	(10)	(125)	(109)	(31)	(140)
Impairment of intangible assets	16	(7)	(2)	(9)	(43)	(4)	(47)
Gain on sale of Canadian business	1	-	1,102	1,102	-	-	-
Other2		(72)	(31)	(103)	(22)	(3)	(25)
Non-operating (loss)/profit before tax	2	(257)	1,122	865	(157)	33	(124)
Dubai included in discontinued operations segment1	2	-	-	-	(22)	22	-
Singapore included in discontinued operations segment1	2	(42)	42	-	(6)	6	-
Share of associates' and joint ventures' tax expense	2	(13)	-	(13)	(5)	-	(5)
Profit attributable to non-controlling interests	2	62	-	62	4	-	4
Profit before tax expense attributable to equity holders' profits		415	1,167	1,582	422	188	610
Tax (expense)/credit attributable to
Operating profit	2	(114)	-	(114)	(82)	(42)	(124)
Non-operating items	2	37	(20)	17	40	(19)	21
Dubai included in discontinued operations segment1	2	-	-	-	-	-	-
Singapore included in discontinued operations segment1	2	-	-	-	-	-	-
Total tax expense attributable to equity holders' profits		(77)	(20)	(97)	(42)	(61)	(103)
Profit for the year		338	1,147	1,485	380	127	507

¹    Dubai and Singapore businesses, the closure of which were announced in November 2014 and June 2015 respectively, are included as discontinued operations for segmental reporting purposes under IFRS 8 as this is reflective of the presentation of information provided to the Chief Operating Decision Maker. These were previously included in the Asia and Emerging Markets segment which has been renamed India and China. Under IFRS 5, Dubai and Singapore do not constitute discontinued operations and are included under continuing operations in the consolidated income statement. Therefore the pro forma reconciliation above includes the reclassification of Dubai and Singapore results between discontinued and continuing operations. Comparatives have been restated.

²    Following regulatory change in Hong Kong a review of expense and reserving assumptions was undertaken which resulted in a £46m non-operating loss being recognised, primarily relating to an impairment of deferred acquisition costs. This is included in Other non-operating items from continuing operations for the year ended 31 December 2015. Other non-operating items from discontinued operations for the year ended 31 December 2015 includes £31m in respect of impairment of deferred acquisition costs and plan enhancements relating to the closure of the Singapore business. See Note 14 for further details.

The Group's chosen supplementary measure of performance is operating profit. The Directors believe that operating profit provides a more useful indication of the long-term operating performance of the Group. To align the measure of the Group's performance with the long-term nature of its business, operating profit excludes items which create short-term volatility. Refer to Note 14 for further details.

The Notes on pages 116 to 236 are an integral part of these consolidated financial statements.

Consolidated statement of financial position

As at 31 December 2015

		2015	2014
	Notes	£m	£m
Assets
Intangible assets	16	566	565
Deferred acquisition costs	17	646	771
Investments in associates and joint ventures	18	5,719	4,508
Investment property	19	9,991	9,041
Property, plant and equipment	20	91	186
Pension and other post-retirement benefit assets	37	897	760
Deferred tax assets	11	35	33
Reinsurance assets	33	5,515	6,036
Loans	21	811	400
Derivative financial assets	21	2,444	4,021
Equity securities and interests in pooled investment funds	21	71,679	71,327
Debt securities	21	66,657	64,441
Receivables and other financial assets	21	1,447	1,248
Current tax recoverable	11	168	191
Other assets	25	89	116
Assets held for sale	26	327	29,338
Cash and cash equivalents	21	9,640	10,617
Total assets		176,722	203,599
Equity
Share capital	28	241	239
Shares held by trusts	29	(6)	1
Share premium reserve	28	628	1,115
Retained earnings	30	2,162	1,816
Other reserves	31	977	1,501
Equity attributable to equity holders of Standard Life plc		4,002	4,672
Non-controlling interests	32	347	278
Total equity		4,349	4,950
Liabilities
Non-participating insurance contract liabilities	33	21,206	21,841
Non-participating investment contract liabilities	34	92,894	88,207
Participating contract liabilities	33	29,654	31,276
Deposits received from reinsurers	35	5,134	5,642
Third party interest in consolidated funds	32	17,196	15,805
Subordinated liabilities	35	1,318	1,612
Pension and other post-retirement benefit provisions	37	33	44
Deferred income	38	236	276
Deferred tax liabilities	11	205	214
Current tax liabilities	11	113	172
Derivative financial liabilities	23	1,254	1,693
Other financial liabilities	35	2,900	3,734
Other liabilities	40	147	100
Liabilities of operations held for sale	26	83	28,033
Total liabilities		172,373	198,649
Total equity and liabilities		176,722	203,599

The Notes on pages 116 to 236 are an integral part of these consolidated financial statements.

The consolidated financial statements on pages 109 to 236 were approved by the Board and signed on its behalf by the following Directors:

Sir Gerry Grimstone Chairman 19 February 2016

Luke Savage Chief Financial Officer 19 February 2016

Consolidated statement of changes in equity

For the year ended 31 December 2015

		Share capital	Shares held by trusts	Share premium reserve	Retained earnings	Other reserves	Total equity attributable to equity holders of Standard Life plc	Non-controlling interests	Total equity
2015	Notes	£m	£m	£m	£m	£m	£m	£m	£m
1 January		239	1	1,115	1,816	1,501	4,672	278	4,950
Profit for the year from continuing operations		-	-	-	276	-	276	62	338
Profit for the year from discontinued operations	12	-	-	-	1,147	-	1,147	-	1,147
Other comprehensive income for the year from continuing operations		-	-	-	169	(13)	156	-	156
Other comprehensive income/(expense) for the year from discontinued operations		-	-	-	(14)	(173)	(187)	-	(187)
Total comprehensive income for the year		-	-	-	1,578	(186)	1,392	62	1,454
Dividends paid on ordinary shares	15	-	-	-	(343)	-	(343)	-	(343)
Issue of share capital	28	2	-	1	-	-	3	-	3
Issue of 'B' shares	28	488	-	(488)	-	-	-	-	-
Issue of 'C' shares	28	-	-	-	-	-	-	-	-
Redemption of 'B' shares	28	(488)	-	-	(488)	488	(488)	-	(488)
Dividends paid on 'C' shares	28	-	-	-	(1,261)	-	(1,261)	-	(1,261)
Purchase of 'C' shares	28	-	-	-	-	-	-	-	-
Dividends due on unclaimed shares not held in the Unclaimed Asset Trust		-	-	-	(2)	-	(2)	-	(2)
Reserves credit for employee share-based payment schemes	31	-	-	-	-	34	34	-	34
Transfer to retained earnings for vested employee share-based payment schemes	30, 31	-	-	-	32	(32)	-	-	-
Transfer between reserves on disposal of subsidiaries	1	-	-	-	827	(827)	-	-	-
Shares acquired by employee trusts		-	(9)	-	-	-	(9)	-	(9)
Shares distributed or sold by employee and other trusts	30	-	2	-	(2)	-	-	-	-
Other movements in non-controlling interests in the period		-	-	-	-	-	-	7	7
Aggregate tax effect of items recognised directly in equity	11	-	-	-	5	(1)	4	-	4
31 December		241	(6)	628	2,162	977	4,002	347	4,349

		Share capital	Shares held by trusts	Share premium reserve	Retained earnings	Other reserves	Total equity attributable to equity holders of Standard Life plc	Non-controlling interests	Total equity
2014	Notes	£m	£m	£m	£m	£m	£m	£m	£m
1 January		238	(6)	1,110	1,391	1,494	4,227	333	4,560
Profit for the year from continuing operations		-	-	-	376	-	376	4	380
Profit for the year from discontinued operations		-	-	-	127	-	127	-	127
Other comprehensive income for the year from continuing operations		-	-	-	296	15	311	-	311
Other comprehensive income for the year from discontinued operations		-	-	-	(15)	(3)	(18)	-	(18)
Total comprehensive income for the year		-	-	-	784	12	796	4	800
Dividends paid on ordinary shares	15	-	-	-	(386)	-	(386)	-	(386)
Issue of share capital	28	1	-	5	-	-	6	-	6
Reserves credit for employee share-based payment schemes	31	-	-	-	-	27	27	-	27
Transfer to retained earnings for vested employee share-based payment schemes	30, 31	-	-	-	27	(27)	-	-	-
Transfer to retained earnings of sale of owner occupied property		-	-	-	4	(4)	-	-	-
Shares acquired by employee trusts		-	(3)	-	-	-	(3)	-	(3)
Shares distributed or sold by employee and other trusts	30	-	10	-	(10)	-	-	-	-
Other movements in non-controlling interests in the year		-	-	-	-	-	-	(59)	(59)
Aggregate tax effect of items recognised directly in equity	11	-	-	-	6	(1)	5	-	5
31 December		239	1	1,115	1,816	1,501	4,672	278	4,950

The Notes on pages 116 to 236 are an integral part of these consolidated financial statements.

Consolidated statement of cash flows

For the year ended 31 December 2015

		2015	2014
	Notes	£m	£m
Cash flows from operating activities
Profit before tax from continuing operations		549	672
Profit before tax from discontinued operations	12	1,167	188
		1,716	860
Change in operating assets	44	(6,607)	(13,455)
Change in operating liabilities	44	4,042	11,700
Adjustment for non-cash movements in investment income		(20)	(242)
Change in unallocated divisible surplus		(117)	(71)
Non-cash items relating to investing and financing activities	44	(1,017)	189
Taxation paid		(261)	(242)
Net cash flows from operating activities		(2,264)	(1,261)
Cash flows from investing activities
Purchase of property, plant and equipment		(8)	(21)
Proceeds from sale of property, plant and equipment		98	13
Acquisition of subsidiaries and unincorporated businesses net of cash acquired		(6)	(297)
Disposal of subsidiaries net of cash disposed of	44	1,600	-
Proceeds from settlement of hedging derivatives contracts		100	-
Acquisition of investments in associates and joint ventures		(9)	(14)
Purchase of intangible assets not acquired through business combinations		(61)	(54)
Net cash flows from investing activities		1,714	(373)
Cash flows from financing activities
Repayment of other borrowings		(3)	(4)
Repayment of subordinated liabilities		(282)	-
Capital flows from third party interest in consolidated funds and non-controlling interests		1,575	3,434
Distributions paid to third party interest in consolidated funds and non-controlling interests		(110)	(172)
Shares acquired by trusts		(9)	(1)
Proceeds from exercise of share options		-	5
Interest paid		(89)	(112)
Return of cash to shareholders under 'B/C' share scheme	15	(1,749)	-
Ordinary dividends paid	15	(343)	(386)
Net cash flows from financing activities		(1,010)	2,764
Net (decrease)/increase in cash and cash equivalents		(1,560)	1,130
Cash and cash equivalents at the beginning of the year		11,243	10,253
Effects of exchange rate changes on cash and cash equivalents		(92)	(140)
Cash and cash equivalents at the end of the year	27	9,591	11,243
Supplemental disclosures on cash flows from operating activities
Interest paid		7	13
Interest received		1,979	2,317
Dividends received		1,923	2,364
Rental income received on investment property		490	597

The Notes on pages 116 to 236 are an integral part of these consolidated financial statements.

Presentation of consolidated financial statements

The Group's significant accounting policies are included at the beginning of the relevant notes to the consolidated financial statements. This section sets out the basis of preparation, a summary of the Group's critical accounting estimates and judgements in applying accounting policies, and other significant accounting policies which have been applied to the financial statements as a whole.

(a)     Basis of preparation

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) as endorsed by the European Union (EU), with interpretations issued by the IFRS Interpretations Committee (IFRICs), and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared on a going concern basis and under the historical cost convention, as modified by the revaluation of investment property, owner occupied property, available-for-sale financial assets, and financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss (FVTPL).

The principal accounting policies set out below have been consistently applied to all financial reporting periods presented in these consolidated financial statements.

(a)(i)   New interpretations and amendments to existing standards that have been adopted by the Group

The Group has adopted and early adopted the following new interpretations and amendments to existing standards which have been endorsed by the EU.

Interpretation or amendment	Effective Date1	Detail
IFRIC 21 Levies	17 June 2014	The interpretation clarifies that an entity recognises a liability for a levy when and only when the triggering event specified in the legislation occurs.
Amendments to IAS 19 Defined Benefit Plans: Employee Contributions	1 February 2015	The amendments clarify the requirements for attributing employee and third party contributions to periods of service and recognising employee and third party contributions in certain situations.
Annual improvements 2010-2012 cycle and Annual improvements 2011-2013 cycle	1 February 2015 and 1 July 2014 respectively	These annual improvements make 11 minor amendments to existing standards.

¹    For annual periods beginning on or after.

The Group's accounting policies have been updated to reflect these. The implementation of the above interpretations and amendments to existing standards has had no significant impact on the Group's financial statements.

(a)(ii)  Standards, interpretations and amendments to existing standards that are not yet effective and have not been early adopted by the Group

Certain new standards, interpretations and amendments to existing standards have been published that are mandatory for the Group's annual accounting periods beginning after 1 January 2015. The Group has not early adopted the standards, amendments and interpretations described below:

IFRS 15 Revenue from Contracts with Customers (effective for annual periods beginning on or after 1 January 2018)

IFRS 15 will replace IAS 18 Revenue and related interpretations. IFRS 15 provides a new five-step revenue recognition model for determining recognition and measurement of revenue from contracts with customers. Extensive new disclosure requirements including estimate and judgement thresholds will also be introduced.

The Group's revenue generated from the following contracts are exempt from this standard:

·   Lease contracts within scope of IAS 17 Leases

·   Insurance contracts within scope of IFRS 4 Insurance Contracts

·   Financial instruments within scope of IAS 39 Financial Instruments: Recognition and Measurement, IFRS 9 Financial Instruments, IFRS 10 Consolidated Financial Statements and IFRS 11 Joint Arrangements

·   Investments in associates and joint ventures within scope of IAS 28 Investments in Associates and Joint Ventures

During 2015 the IASB has issued an exposure draft with clarifications to the standard and delayed the mandatory adoption date until 1 January 2018. The Group does not intend to early adopt the standard which has not yet been endorsed by the EU.

A detailed impact assessment was commenced in 2015, reviewing contracts and analysing the revenue recognised by the Group. From the work completed to date, no material impact on profit or net assets has been identified. Further analysis of the revenues generated within the Group's investment management business and by investment contract within the Group's insurance businesses will be completed in 2016.

IFRS 9 Financial Instruments (effective for annual periods beginning on or after 1 January 2018)

IFRS 9 will replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 allows two measurement categories for financial assets in the statement of financial positon: amortised cost and fair value. All equity instruments and derivative instruments are measured at fair value. A debt instrument is measured at amortised cost only if it is held to collect contractual cash flows and the cash flows represent principal and interest, otherwise it is classified at fair value through other comprehensive income (FVOCI) or fair value through profit or loss (FVTPL) depending on the business model it is held within or whether the option to adopt FVTPL has been applied. Changes in value of all equity instruments and derivative instruments are recognised in profit or loss unless an OCI presentation election is made at initial recognition for an equity instrument or a derivative instrument is designated as a hedging instrument in a cash flow hedge.  IFRS 9 also introduces a new impairment model, an expected credit loss model which will replace the current incurred loss model in IAS 39. An impairment loss may now be recognised prior to a loss event occurring. Accounting for financial liabilities remains the same as under IAS 39 except that for financial liabilities designated as at FVTPL, changes in the fair value due to changes in the liability's credit risk are recognised in OCI.

Additionally IFRS 9 amends the current requirements for assessing hedge effectiveness in IAS 39 and also amends what qualifies as a hedged item and some of the restrictions on what qualifies as a hedging instrument. The accounting and presentation requirements for designated hedging relationships remain largely unchanged.

As well as presentation and measurement changes, IFRS 9 also introduces additional disclosure requirements. The standard has not yet been endorsed by the EU.

An Exposure Draft was issued by the IASB in December 2015 proposing amendments to IFRS 4 Insurance Contracts. The amendments are intended to address the consequences of the different effective dates of IFRS 9 and the new insurance contracts standard by permitting insurers to either defer implementation of IFRS 9 to align with the implementation of the new insurance standard, if they satisfy criteria regarding the predominance of their insurance activities, or apply an overlay approach to remove incremental volatility from the income statement.

An initial high level assessment has been undertaken of the impact of implementing IFRS 9. It is not expected that the implementation will have a significant impact on the classification of financial assets and financial liabilities, with the Group continuing to classify the majority of these instruments as FVTPL in line with the current accounting policy. It is possible that based on the business model being applied on the adoption date of IFRS 9 certain portfolios of debt securities in the shareholder business risk segment may be classified as either FVTPL or FVOCI (at 31 December 2015 these portfolios have a fair value of £2bn compared to total financial assets of £158bn). The implementation of the new impairment model and the revised requirements for the application of hedge accounting are not expected to have a significant impact.

IFRS 16 Leases (effective for annual periods beginning on or after 1 January 2019)

The IASB issued the new standard on leases in January 2016. Management are currently reviewing the new requirements and the impact on the Group's financial statements will be assessed in due course. The standard has not yet been endorsed by the EU.

Other

There are no other new standards, interpretations and amendments to existing standards that have been published that are expected to have a significant impact on the consolidated financial statements of the Group.

(a)(iii)   Critical accounting estimates and judgements in applying accounting policies

The preparation of financial statements requires management to exercise judgements in applying the accounting policies and make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses arising during the year. Judgements and sources of estimation uncertainty are continually evaluated and based on historical experience and other factors, including expectations of future events, that are believed to be reasonable under the circumstances. The areas where judgements, estimates and assumptions have the most significant effect on the amounts recognised in the consolidated financial statements are as follows:

Financial statement area	Critical judgements in applying accounting policies	Related note
Classification of insurance, reinsurance and investment contracts	Assessment of the significance of insurance risk transferred, and treatment of contracts which have insurance, non-participating investment and participating investment elements.	Note 33
Defined benefit pension plans	Assessment of whether the Group has an unconditional right to a refund of the surplus	Note 37
Consolidation assessment for structured entities	Assessment of control Assessment of significant influence	Basis of consolidation and Note 18
Contingent liabilities	Assessment of whether the Group has a contingent liability in relation to conduct matters	Note 45

Financial statement area	Critical accounting estimates and assumptions	Related note
Participating contracts, non-participating insurance contracts and reinsurance contracts	Determination of the valuation interest rates, and investment returns Determination of longevity and mortality assumptions Determination of expense assumptions	Note 33
Financial instruments at fair value through profit or loss	Determination of the fair value of private equity investments, debt securities categorised as level 3 in the fair value hierarchy and over-the-counter derivatives	Notes 21 and 43
Investment property	Determination of the fair value of investment property	Notes 19 and 43
Defined benefit pension plans	Determination of UK pension plan assumptions for mortality, discount rate and inflation	Note 37
Intangible assets	Identification and valuation of identifiable intangible assets arising from business combinations Determination of useful lives of intangible assets Determination of the recoverable amount	Note 16

Further detail on critical accounting estimates and assumptions is provided in the relevant note.

(a)(iv)   Foreign currency translation

The consolidated financial statements are presented in millions pounds Sterling.

The statements of financial position of Group entities that have a different functional currency than the Group's presentation currency are translated into the presentation currency at the year end exchange rate and their income statements and cash flows are translated at average exchange rates for the year. All resulting exchange differences arising are recognised in other comprehensive income and the foreign currency translation reserve in equity.

Foreign currency transactions are translated into the functional currency at the exchange rate prevailing at the date of the transaction. Gains and losses arising from such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the relevant line in the consolidated income statement.

Translation differences on non-monetary items, such as equity securities held at fair value through profit or loss, are reported as part of the fair value gain or loss within net investment return in the consolidated income statement. Translation differences on financial assets and liabilities held at amortised cost are included in the relevant line in the consolidated income statement.

The income statements and cash flows, and statements of financial position of Group entities that have a different functional currency from the Group's presentation currency have been translated using the following principal exchange rates:

	2015	2015	2014	2014
	Income statement and cash flows (average rate)	Statement of financial position (closing rate)	Income statement (average rate)	Statement of financial position (closing rate)
Euro	1.375	1.357	1.244	1.289
US Dollar	1.528	1.474	1.647	1.559
Canadian Dollar	1.956	2.047	1.818	1.806
Indian Rupee	98.116	97.504	100.735	98.425
Chinese Renminbi	9.599	9.571	10.151	9.674
Hong Kong Dollar	11.844	11.423	12.775	12.092

The sale of Standard Life Financial Inc. and Standard Life Investments Inc. completed on 30 January 2015 as discussed in Note 1. The average Canadian dollar rate used to translate the income statements and cash flows of these entities for the period ended 30 January 2015 was 1.855 and the rate used to translate the statement of financial position of these entities at 30 January 2015 was 1.904. The average Canadian dollar rate in the table above for the year to 31 December 2015 was used to translate the income statement and cash flows of Standard Life Assurance Limited (SLAL) Canada branch, the assets and liabilities of which were transferred on 31 December 2015 as part of the sale of the Canadian business.

(b)     Basis of consolidation

The Group's financial statements consolidate the financial statements of the Company and its subsidiary undertakings.

Subsidiaries are all entities (including investment vehicles) over which the Group has control. Control arises when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. For operating entities this generally accompanies a shareholding of 50% or more in the entity. For investment vehicles, including structured entities, the control assessment also considers the removal rights of other investors and whether the Group acts as principal or agent in assessing the link between power and variable returns. In determining whether the Group acts as principal, and therefore controls the entity, the scope of the Group's decision-making authority and the magnitude of the variability associated with the returns are also taken into account. As a result, the Group often is considered to control investment vehicles in which its shareholding is less than 50%.

Where the Group is considered to control an investment vehicle, such as an open-ended investment company, a unit trust or a limited partnership, and it is therefore consolidated, the interests of parties other than the Group are assessed to determine whether they should be classified as liabilities or as non-controlling interests. The liabilities are recognised in the third party interest in consolidated funds line in the consolidated statement of financial position and any movements are recognised in the consolidated income statement. The financial liability is designated at fair value through profit or loss (FVTPL) as it is implicitly managed on a fair value basis as its value is directly linked to the market value of the underlying portfolio of assets.  The interests of parties other than the Group in all other types of entities are recorded as non-controlling interests.

All intra-group transactions, balances, income and expenses are eliminated in full.

The Group uses the acquisition method to account for acquisitions of businesses. At the acquisition date the assets and liabilities of the business acquired are identified and initially measured at fair value on the consolidated statement of financial position.

When the Group acquires or disposes of a subsidiary, the profits and losses of the subsidiary are included from the date on which control was transferred to the Group until the date on which it ceases, with consistent accounting policies applied across all entities throughout.

Notes to the Group financial statements

1.    Group structure

(a)     Composition

The following diagram is an extract of the Group structure at 31 December 2015 and gives an overview of the composition of the Group.  Diagram removed for the purposes of this announcement.  However it can be viewed in full in the pdf document.

A full list of the Company's subsidiaries is provided in Note 50.

(b)     Acquisitions

On 6 February 2015, the Group announced the launch of its wholly owned, UK-wide financial advice business, 1825. At the same time, the Company agreed to purchase the entire share capital of Pearson Jones plc from Skipton Group Holdings Limited. Pearson Jones is an established advice firm with assets under advice of £1.1bn at the acquisition date. The acquisition completed on 11 May 2015 and is not material to the Group.

Prior year acquisition

On 1 July 2014, Standard Life Investments (Holdings) Limited, a wholly owned subsidiary of the Company acquired the entire share capital of Ignis Asset Management Limited (Ignis). The consideration transferred included a contingent consideration asset which was measured at fair value at £20m at the acquisition date. The contingent consideration relates to withdrawals of certain AUM acquired through the business combination. If AUM is withdrawn under certain circumstances, and outwith the expected run-off profile of the assets, then the seller will repay part of the purchase consideration for a period of up to 10 years from the acquisition date.  The fair value of the asset at 31 December 2015 is £15m (2014: £20m). The movement in fair value of the contingent consideration asset has been recognised in other income in the consolidated income statement.

(c)     Disposals

On 3 September 2014 the Group announced its intention to sell its Canadian business to The Manufacturers Life Insurance Company (MLC), a subsidiary of Manulife Financial Corporation (Manulife). The sale of the Group's Canadian long-term savings and retirement, individual and group insurance business (Standard Life Financial Inc.) and Canadian investment management business (Standard Life Investments Inc.) completed on 30 January 2015. The assets and liabilities of the Canadian branch of Standard Life Assurance Limited (SLAL Canada branch) were transferred on 31 December 2015 following the fulfilment of certain conditions to completion, including regulatory approval. The consideration, which was received on 30 January 2015, was CA$4.0bn (£2.1bn) and a further £0.1bn was received from the settlement of related hedging derivative contracts. The Group recognised a gain on disposal in respect of the sale which is included in profit from discontinued operations in the consolidated income statement for the year ended 31 December 2015. The gain on sale was calculated as follows:

		£m
Total assets of operations disposed of		(28,553)
Total liabilities of operations disposed of		27,352
Net assets of operations disposed of		(1,201)
Consideration less transaction costs and provision recognised on disposal		2,066
Release of available-for-sale financial assets reserve		17
Release of cash flow hedges reserve		60
Release of net investment hedge reserve		110
Release of foreign currency translation reserve		50
Gain on sale		1,102

The gain on sale was exempt from tax under UK and Canadian tax legislation.

The following additional reserve releases were made as a result of the sale. These releases were taken directly to retained earnings.

		£m
Reserve arising on Group reconstruction		(221)
Merger reserve		1,028
Revaluation of owner occupied property reserve		20
		827

2.    Segmental analysis

The Group's reportable segments have been identified in accordance with the way in which the Group is structured and managed. IFRS 8 Operating Segments requires that the information presented in the financial statements is based on information provided to the 'Chief Operating Decision Maker'. The Chief Operating Decision Maker for the Group is the strategic executive committee.

(a)     Basis of segmentation

The Group's reportable segments are as follows:

Continuing operations:

Standard Life Investments

Standard Life Investments provides a range of investment products for individuals and institutional customers through a number of different investment vehicles. Investment management services are also provided by Standard Life Investments to the Group's other reportable segments. This segment includes the Group's share of the results of HDFC Asset Management Company Limited.

UK and Europe

UK and Europe provide a broad range of long-term savings and investment products to individual and corporate customers in the UK, Germany, Austria and Ireland.

India and China (formerly Asia and Emerging Markets)

The businesses included in India and China offer a range of insurance and savings products and comprise our life insurance associate in India, our life insurance joint venture in China, and wholly owned operations in Hong Kong.

Other

This primarily includes the corporate centre and related activities. 

Discontinued operations:

Canada

The operations in Canada provided long-term savings, investment and insurance solutions to individuals, and group benefit and retirement plan members. The Canadian business was sold on 30 January 2015.

Dubai

The business in Dubai provided a range of savings and investment products. The closure of this business was announced in November 2014. This business was previously included in the Asia and Emerging Markets segment. The results of this business were included as discontinued operations for segmental reporting purposes as at 31 December 2014 as this was reflective of the presentation of information provided to the Chief Operating Decision Maker. Under IFRS 5, Dubai did not constitute a discontinued operation and was included under continuing operations in the IFRS consolidated income statement. Therefore the segmental analysis disclosures include the reclassification of Dubai results between discontinued and continuing operations.

Singapore

The business in Singapore provided a range of savings and insurance products. The closure of this business was announced in June 2015. This business was previously included in the Asia and Emerging Markets segment.

(b)     Reportable segments - Group operating profit, revenue and asset information

The key performance metrics of the Group include operating profit before tax and assets under administration (AUA), which are analysed below by reportable segment. The following change was made to the financial information provided to the strategic executive committee in the year to 31 December 2015:

·   On 25 June 2015, the Group announced the closure of the Singapore business. The results of this business are included as discontinued operations for segmental reporting purposes as this is reflective of the presentation of information provided to the Chief Operating Decision Maker. Singapore was previously included in the Asia and Emerging Markets segment (now India and China). Under IFRS 5, Singapore does not constitute a discontinued operation and is included under continuing operations in the IFRS consolidated income statement. Therefore the segmental analysis disclosures include the reclassification of Singapore results between discontinued and continuing operations.

Comparative amounts for the year ended 31 December 2014 have been prepared on the same basis as 31 December 2015 to allow more meaningful comparison.

(b)(i)   Analysis of Group operating profit by segment

As described beneath the pro forma reconciliation of consolidated operating profit to profit for the year, operating profit is considered to present an indication of the long-term operating performance of the Group. Operating profit is the key measure utilised by the Group's management in their evaluation of segmental performance and is therefore also presented by reportable segment.

		Standard Life Investments	UK and Europe	India and China	Other	Eliminations	Total continuing operations	Discontinued operations1	Total
31 December 2015	Notes	£m	£m	£m	£m	£m	£m	£m	£m
Fee based revenue		843	808	38	-	(110)	1,579	21	1,600
Spread/risk margin		-	145	-	-	-	145	9	154
Total income		843	953	38	-	(110)	1,724	30	1,754
Total operating expenses		(532)	(610)	(36)	(56)	110	(1,124)	(29)	(1,153)
Capital management		-	14	-	(5)	-	9	2	11
Share of associates' and joint ventures' profit before tax2		31	-	25	-	-	56	-	56
Operating profit/(loss) before tax		342	357	27	(61)	-	665	3	668
Tax on operating profit		(64)	(54)	-	4	-	(114)	-	(114)
Share of associates' and joint ventures' tax expense	11	(11)	-	(2)	-	-	(13)	-	(13)
Operating profit/(loss) after tax		267	303	25	(57)	-	538	3	541
Adjusted for the following items:
Short-term fluctuations in investment return and economic assumption changes	14	-	(54)	-	(9)	-	(63)	63	-
Restructuring and corporate transaction expenses	10	(23)	(75)	-	(17)	-	(115)	(10)	(125)
Impairment of intangible assets	16	(5)	(2)	-	-	-	(7)	(2)	(9)
Gain on sale of Canadian business	1	-	-	-	-	-	-	1,102	1,102
Other		(25)	-	(47)	-	-	(72)	(31)	(103)
Total non-operating items		(53)	(131)	(47)	(26)	-	(257)	1,122	865
Tax on non-operating items		11	16	5	5	-	37	(20)	17
Singapore included in discontinued operations segment1		-	-	(42)	-	-	(42)	42	-
Profit for the year attributable to equity holders of Standard Life plc		225	188	(59)	(78)	-	276	1,147	1,423
Profit attributable to non-controlling interests							62	-	62
Profit for the year							338	1,147	1,485

¹    Under IFRS 5, Singapore does not constitute a discontinued operation and is included under continuing operations in the consolidated income statement. Therefore the analysis of Group operating profit by segment above includes the reclassification of Singapore results between discontinued and continuing operations.

²    Share of associates' and joint ventures' profit before tax comprises the Group's share of results of HDFC Standard Life Insurance Company Limited, Heng An Standard Life Insurance Company Limited and HDFC Asset Management Company Limited.

Each operating segment reports total income as its measure of revenue in its analysis of operating profit. Fee based revenue consists of income generated primarily from asset management charges, premium based charges and transactional charges. Spread/risk margin reflects the margin earned on spread/risk business and includes net earned premiums, claims and benefits paid, net investment return using long-term assumptions and actuarial reserving changes.

The Group has a widely diversified policyholder base and is therefore not reliant on any individual customers.

		Standard Life Investments	UK and Europe	India and China	Other	Eliminations	Total continuing operations	Discontinued operations1	Total
31 December 2014	Notes	£m	£m	£m	£m	£m	£m	£m	£m
Fee based revenue		686	802	49	-	(108)	1,429	223	1,652
Spread/risk margin		-	183	-	-	-	183	191	374
Total income		686	985	49	-	(108)	1,612	414	2,026
Total operating expenses		(450)	(605)	(44)	(54)	108	(1,045)	(302)	(1,347)
Capital management		-	10	-	(8)	-	2	15	17
Share of associates' and joint ventures' profit before tax2		21	-	18	-	-	39	-	39
Operating profit/(loss) before tax		257	390	23	(62)	-	608	127	735
Tax on operating profit		(51)	(43)	(1)	13	-	(82)	(42)	(124)
Share of associates' and joint ventures' tax expense	11	(7)	-	2	-	-	(5)	-	(5)
Operating profit/(loss) after tax		199	347	24	(49)	-	521	85	606
Adjusted for the following items
Short-term fluctuations in investment return and economic assumption changes	14	1	29	-	(13)	-	17	71	88
Restructuring and corporate transaction expenses	10	(51)	(51)	-	(7)	-	(109)	(31)	(140)
Impairment of intangible assets	16	(43)	-	-	-	-	(43)	(4)	(47)
Other		(9)	(11)	-	(2)	-	(22)	(3)	(25)
Total non-operating items		(102)	(33)	-	(22)	-	(157)	33	(124)
Tax on non-operating items		17	18	-	5	-	40	(19)	21
Dubai included in discontinued operations segment1		-	-	(22)	-	-	(22)	22	-
Singapore included in discontinued operations segment1		-	-	(6)	-	-	(6)	6	-
Profit/(loss) for the year attributable to equity holders of Standard Life plc		114	332	(4)	(66)	-	376	127	503
Profit attributable to non-controlling interests							4	-	4
Profit for the year							380	127	507

¹    Under IFRS 5, Dubai and Singapore do not constitute discontinued operations and are included under continuing operations in the consolidated income statement. Therefore the analysis of Group operating profit by segment above includes the reclassification of Dubai and Singapore results between discontinued and continuing operations.

²    Share of associates' and joint ventures' profit before tax comprises the Group's share of results of HDFC Standard Life Insurance Company Limited, Heng An Standard Life Insurance Company Limited and HDFC Asset Management Company Limited.

(b)(ii)  Total income and expenses

The following table provides a reconciliation of total income and total operating expenses from continuing operations, as presented in the analysis of Group operating profit by segment, to total revenue and total expenses respectively, as presented in the consolidated income statement:

	2015		2014
	Income	Expenses	Income	Expenses
	£m	£m	£m	£m
Total income or operating expenses from continuing operations as presented in the analysis of Group operating profit by segment	1,724	(1,124)	1,612	(1,045)
Net insurance benefits and claims	4,029	(4,029)	3,856	(3,856)
Change in reinsurance assets and liabilities	520	(520)	(60)	60
Change in insurance and participating contract liabilities	(1,693)	1,693	3,834	(3,834)
Change in unallocated divisible surplus	(117)	117	(71)	71
Change in non-participating investment contract liabilities	3,363	(3,363)	5,362	(5,362)
Expenses under arrangements with reinsurers	42	(42)	639	(639)
Change in liability for third party interest in consolidated funds	531	(531)	758	(758)
Other presentation differences	305	(305)	396	(396)
Tax movement attributable to policyholder returns	134	-	250	-
Non-operating items	(23)	(234)	1	(158)
Non-controlling interests and capital management	71	-	4	-
Dubai included in discontinued operations segment1	-	-	4	(26)
Singapore included in discontinued operations segment1	6	(48)	3	(9)
Total revenue or expenses from continuing operations as presented on the consolidated income statement	8,892	(8,386)	16,588	(15,952)

¹      Under IFRS 5, Dubai and Singapore do not constitute discontinued operations and are included under continuing operations in the consolidated income statement. Therefore the reconciliation includes the reclassification of Dubai and Singapore results between discontinued and continuing operations.

This reconciliation includes a number of reconciling items which arise due to presentation differences between IFRS reporting requirements and the determination of operating income and expenses. Operating income and expenses exclude items which have an equal and opposite effect on IFRS revenue and IFRS expenses in the consolidated income statement, such as investment returns which are for the account of policyholders.  Other presentation differences in the above reconciliation generally relates to items included in administrative expenses which are borne by policyholders, for example investment property management expenses, or are directly related to fee income.

(b)(iii) Analysis of assets under administration by segment

Group AUA presents a measure of the total assets of the Group including those administered on behalf of customers and institutional clients. AUA represents the IFRS gross assets of the Group adjusted to include third party AUA, which is not included on the consolidated statement of financial position. In addition, certain assets on the consolidated statement of financial position are excluded from the definition, including reinsurance assets, deferred acquisition costs and intangible assets. 

As a long-term savings and investments business, AUA is a key driver of shareholder value and is consequently one of the key measures utilised by the strategic executive committee in their evaluation of segmental performance. AUA is therefore presented by reportable segment (in billions).

	Standard Life Investments	UK and Europe	India and China	Other	Eliminations1	Total continuing operations	Discontinued operations	Total
31 December 2015	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Assets under administration
Fee based	170	127	1	-	(18)	280	-	280
Spread/risk	-	15	-	-	-	15	-	15
Assets not backing products in long-term savings business	-	8	-	-	-	8	-	8
Associate and joint venture businesses	-	-	2	-	-	2	-	2
Other corporate assets	1	-	-	1	-	2	-	2
Total assets under administration	171	150	3	1	(18)	307	-	307
Third party AUA								(155)
Reinsurance assets								6
Deferred acquisition costs								1
Assets attributable to third party interest in consolidated funds and non-controlling interests								18
Other								-
Total assets per consolidated statement of financial position								177

¹    In order to be consistent with the presentation of new business information, certain products are included in both Standard Life Investments AUA and other segments. Therefore, at a Group level an elimination adjustment is required to remove any duplication, in addition to other necessary consolidation adjustments.

The third party AUA adjustment mainly relates to the investment products element of third party funds under administration and non-insured self invested personal pension (SIPP) AUA which are not included on the consolidated statement of financial position. Assets attributable to third party interest in consolidated funds and non-controlling interests are included on the consolidated statement of financial position but are excluded from the Group's AUA.

	Standard Life Investments	UK and Europe	India and China	Other	Eliminations1	Total continuing operations	Discontinued operations	Total
31 December 2014	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Assets under administration
Fee based	162	122	-	-	(15)	269	21	290
Spread/risk	-	16	-	-	-	16	9	25
Assets not backing products in long-term savings business	-	8	-	-	-	8	2	10
Associate and joint venture businesses	-	-	2	-	-	2	-	2
Other corporate assets	1	-	-	1	-	2	-	2
Total assets under administration	163	146	2	1	(15)	297	32	329
Third party AUA								(149)
Reinsurance assets								6
Deferred acquisition costs								1
Assets attributable to third party interest in consolidated funds and non-controlling interests								16
Other								1
Total assets per consolidated statement of financial position								204

¹    In order to be consistent with the presentation of new business information, certain products are included in both Standard Life Investments AUA and other segments. Therefore, at a Group level an elimination adjustment is required to remove any duplication, in addition to other necessary consolidation adjustments.

(c)     Total revenue by geographical location

Total revenue from continuing operations as presented in the consolidated income statement split by geographical location in which it was earned is as follows:

	2015	2014
	£m	£m
UK	6,628	12,740
Rest of the world	2,264	3,848
Total	8,892	16,588

The revenue of the operating businesses is allocated based on customer location. The return on investment funds is allocated based on where funds are registered.

(d)     Non-current non-financial assets by geographical location

	2015	2014
	£m	£m
UK	9,954	8,345
Rest of the world	694	1,447
Total	10,648	9,792

Non-current non-financial assets for this purpose consist of investment property, property, plant and equipment and intangible assets (excluding deferred acquisition costs).

3.      Business written in the Group's insurance entities

(a)     How the business is held in the Group's insurance entities

The Group's insurance and investment contracts are held by the regulated entities within each reportable segment. Each regulated entity operates various funds and how the business is held within these funds is outlined below by reportable segment.

(a)(i)   UK and Europe

Standard Life Assurance Limited

The main entity in the UK and Europe reportable segment that issues insurance and investment contracts is Standard Life Assurance Limited (SLAL). SLAL operates a fund structure which was established on the demutualisation of The Standard Life Assurance Company on 10 July 2006, under which its recognised assets and liabilities are allocated to one of the following funds:

·   Shareholder Fund (SHF)

·   Proprietary Business Fund (PBF) - includes UK, German and Irish branches

·   Heritage With Profits Fund (HWPF) - includes UK, German and Irish branches            

·   German With Profits Fund (GWPF)

·   German Smoothed Managed With Profits Fund (GSMWPF)

·   UK Smoothed Managed With Profits Fund (UKSMWPF)

SLAL - Insurance and investment contracts issued since demutualisation

The liabilities and associated supporting assets for contracts issued since demutualisation are held in the PBF except for the element of any contract where the customer has chosen to invest in a with profits (i.e. participating) fund. The assets and associated liabilities, including liabilities for financial guarantees, for such with profits investment elements are held in the GWPF, GSMWPF or UKSMWPF. The PBF is sub-divided into internal linked funds (unit linked funds) and a non-unit linked fund. Where a customer invests on a unit linked basis, the assets and corresponding liabilities for such unit linked investment elements are held in the unit linked funds. Asset management charges are transferred from the unit linked funds to the non-unit linked sub-fund of the PBF as they arise. Any liabilities for insurance features or financial guarantees contained within a contract that has a unit linked investment element are held in the non-unit linked sub-fund of the PBF. Any liabilities for insurance features contained within a contract that has a with profits element are held in the non-unit linked sub-fund of the PBF. Deferred income and deferred acquisition costs arising on contracts that have a unit linked investment element or a with profits investment element are held in the non-unit linked sub-fund of the PBF.

SLAL - Insurance and investment contracts issued before demutualisation

The liabilities and associated supporting assets for contracts, both participating and non-participating, issued prior to demutualisation are mostly held in the HWPF except for (i) the assets and corresponding liabilities for unit linked investment elements of such contracts, and (ii) the supporting assets and associated liabilities for longevity risk and investment risk on certain annuity contracts. The assets and associated liabilities for these two contract components are held in the PBF. Asset management charges arising on unit linked investment elements are transferred from the PBF to HWPF as they arise. Any liabilities for insurance features or financial guarantees contained within a contract that has a unit linked investment element or a with profits investment element are held in the HWPF. Deferred income and deferred acquisition costs arising on contracts that have a unit linked investment element or a with profits investment element are also held in the HWPF.

Under the Scheme of Demutualisation (the Scheme) the residual estate of the HWPF exists to meet amounts which may be charged to the HWPF under the Scheme. However, to the extent that the board of SLAL is satisfied that there is an excess residual estate, it shall be distributed over time as an enhancement to final bonuses payable on the remaining eligible policies invested in the HWPF. The Scheme provides that certain defined cash flows (recourse cash flows (RCF)) arising in the HWPF on specified blocks of UK and Irish business, both participating and non-participating, may be transferred out of that fund when they emerge, being transferred to the SHF, and thus accrue to the ultimate benefit of equity holders of the Company. The Scheme also provides for additional expenses to be charged by the PBF to the HWPF in respect of German branch business. Under these mechanisms, profits, on an RCF basis, on non-participating business excluding investment spread profits on annuities and profits, on an RCF basis or German additional expenses basis, on unitised with profits contracts, are transferred to the SHF. All investment return on HWPF investments is retained in the HWPF for the ultimate benefit of participating policyholders. Under the Scheme, transfers to the SHF are subject to certain constraints in order to protect policyholders.

Standard Life International Limited

The UK and Europe reportable segment also contains the International Bond issued by Standard Life International Limited (SLIL) to UK residents. SLIL operates using a shareholder fund and a long-term business fund which is sub-divided into unit linked funds and a non-unit linked fund. Where a customer invests on a unit linked basis, the assets and associated liabilities for such unit linked investment elements are held in the unit linked funds. Any liabilities for insurance features contained within a contract that has a unit linked investment element are held in the non-unit linked fund. Deferred income and deferred acquisition costs arising on contracts that have a unit linked investment element are held in the non-unit linked fund.

(a)(ii)  India and China

The entity in the India and China reportable segment that issues insurance and investment contracts, other than associates and joint ventures, is Standard Life (Asia) Limited (SLA) which is a Hong Kong entity. SLA operates using a shareholder fund and a long-term business fund which is sub-divided into unit linked funds and a non-unit linked fund. Where a customer invests on a unit linked basis, the assets and associated liabilities for such unit linked investment elements are held in the unit linked funds. Any liabilities for insurance features contained within a contract that has a unit linked investment element are held in the non-unit linked fund. Deferred income and deferred acquisition costs arising on contracts that have a unit linked investment element are held in the non-unit linked fund.

(a)(iii)   Canada

The Canadian business was included as discontinued operations following the announcement on 3 September 2014. The main entity in the Canada reportable segment that issued insurance and investment contracts was The Standard Life Assurance Company of Canada (SLCC) which has been renamed SCDA (2015) Inc. since its disposal. SLCC operated a fund structure under which certain recognised assets and associated liabilities were allocated to either segregated funds or a participating fund. Its remaining recognised assets were managed together to support other contract liabilities and to contribute to equity holders surplus. Where a customer chose to invest on a segregated fund basis, the assets and associated liabilities for such segregated fund investment elements were held in the segregated funds. SLCC's segregated funds operated on a similar basis to SLAL's unit linked funds. Any liabilities for insurance features or financial guarantees contained within a contract that had a segregated fund investment element were held outside the segregated funds. Deferred income and deferred acquisition costs arising on contracts that had a segregated fund investment element were also held outside the segregated funds.

Until 31 December 2015 SLAL operated a Canada branch. A separate sub-fund of the PBF was maintained for this branch. All contracts issued from SLAL's Canadian PBF were wholly reinsured to SLCC.

(b)      Insurance, investment and reinsurance contract terms including guarantees and options

Details of the significant types of insurance and investment contracts issued by the Group, the nature of any guarantees and options provided under these contracts and details of significant reinsurance contracts are given below. The accounting policy for the classification of contracts is set out in Note 33.

(b)(i)    UK and Europe - Insurance and investment contracts issued since demutualisation

UK annuity-in-payment contracts (spread/risk business)

This class of business consists of single premium contracts that provide guaranteed annuity payments. The payments depend on the survival of a life or lives with or without a guaranteed period and may reduce on a specified death or increase each year at a predefined rate or based on the movement in UK RPI. These contracts are classified as non-participating insurance contracts.

The total liability at 31 December 2015 for RPI linked annuities in payment (including any guaranteed minimum rate of escalation) is £373m (2014: £373m) and this represents approximately 9% (2014: 9%) of the total liability for UK annuity in payment contracts held within the PBF. There is a subset of annuities where the RPI linked annuity payment cannot fall or is guaranteed to increase at a minimum rate; the majority of such annuities are those whose payment cannot fall. If the market moves in line with the adverse scenarios as shown in the market risk sensitivity analysis in Note 41(b), then the impact on shareholder equity from these RPI linked annuities and corresponding assets is not significant.

For those annuities in payment which increase at a predefined rate, the total liability at 31 December 2015 is £348m (2014: £343m) and this represents approximately 9% (2014: 8%) of the total liability for UK annuity in payment contracts held in the PBF. If the market moves in line with the adverse market conditions as shown in the market risk sensitivity analysis, the impact on shareholder equity from those annuities with a predefined rate of increase and the corresponding assets is not significant.

UK and Irish unit linked pension contracts (fee business)

This class of business comprises single or regular premium contracts under which a percentage of the premium is used to allocate units in one or more unit linked funds. These contracts do not provide significant death benefits in excess of the accumulated value of investment fund. They are classified as non-participating investment contracts.

Contracts are categorised as retail (e.g. UK Active Money Self Invested Personal Pensions (SIPP), UK Active Money Personal Pension, UK Stakeholder, Irish Synergy Personal Pension), corporate (e.g. UK Group SIPP, UK Group Flexible Retirement Plan, UK Group Stakeholder) and institutional (Trustee Investment Plan). These contracts do not contain a with profits investment option except for UK Group Stakeholder and UK Stakeholder, under which customers may invest in the UKSMWPF.

The costs of contracts invested in unit linked funds are recovered by deduction of an asset management charge from the unit linked funds. Under Stakeholder contracts, this asset management charge has a specified maximum limit. There are no other guarantees on these contracts with the exception that the unit prices of certain cash funds are guaranteed not to fall.

Under UK SIPP contracts, as well as investing in unit linked funds offered by SLAL, policyholders can choose to invest in a wide range of other permitted investments. These other investments are not recognised on the Group's consolidated statement of financial position.

UK unit linked investment bonds (fee business)

Unit linked investment bonds issued by SLAL (e.g. Capital Investment Bond) are single premium whole of life contracts under which a percentage of the premium is used to allocate units in one or more unit linked funds. These contracts do not provide significant death benefits in excess of the accumulated value of investment fund. They are classified as non-participating investment contracts. There are no other guarantees on these contracts with the exception that the unit prices of certain cash funds are guaranteed not to fall.

The International Bond is issued by SLIL to UK residents. It is a single premium whole of life investment bond. The customer has the option to invest in unit linked funds offered by SLIL and mutual funds and deposit accounts offered by other providers. The mutual funds and deposit accounts are recognised as assets by the Group and are classified as unit linked business along with a corresponding liability. On death of the last life assured an additional benefit of 0.1% of the surrender value is paid unless the death is accidental when an additional benefit of 10% of the surrender value is paid subject to a £1m cap. These contracts are classified as insurance contracts where it is considered that the accidental death benefit transfers significant insurance risk. No other guarantees apply to this contract.

German unitised with profits deferred annuity contracts (fee business)

German unitised with profits deferred annuity contracts were written in the PBF with the participating investment elements being transferred to the GWPF and, to a significantly lesser extent, to the GSMWPF. These contracts were closed to new business in 2015. The death benefit under all of the deferred annuities is the greater of the sum assured on death, 100% of the current surrender value, the nominal fund, and, for regular premium paying contracts and certain single premium contracts, a refund of premiums. These contracts are classified as participating insurance contracts.

The maturity value of contracts invested in the GWPF is subject to guaranteed minimum amounts. In addition, certain contracts are subject to guaranteed annuity amounts or guaranteed annuity factors and certain unit prices in the GWPF are guaranteed not to decrease.

The GWPF is operated such that all investment return on assets held in the fund will be distributed to participating policyholders over time subject to deductions of asset management charges and deductions for guarantees.

(b)(ii)   UK and Europe - Insurance and investment contracts issued before demutualisation and related reinsurance contracts

HWPF participating contract allocations of regular and final bonuses

This section firstly describes the method used by the Group to determine the regular and final bonuses allocated to participating contracts held in the HWPF. It then describes the significant types of insurance and investment contracts held in that fund, the nature of any guarantees provided and significant reinsurance contracts.

As shown in the market risk sensitivity analysis in Note 41(b), there is no impact on shareholder equity arising from contracts in the HWPF for either of the market movements scenarios. As explained in the limitations of the sensitivity analysis, this is because although shareholders are potentially exposed to the full cost if the assets of the HWPF are insufficient to meet policyholder obligations, the assumption changes given are not severe enough for such an event to occur.

Regular bonuses are declared at the discretion of the Group in accordance with the Principles and Practices of Financial Management (PPFM) of the HWPF for UK business and similar principles for European business and are set at levels which aim to achieve a gradual build-up in guaranteed participating policy benefits whilst not unduly constraining investment freedom and the prospects for final bonuses. In setting these rates, the financial position (both current and projected) of the HWPF is taken into account, and were it necessary, regular bonus rates would be set to zero. Regular bonus rates are set for each relevant class of participating policy and/or internal fund and reflect its characteristics, including any guarantees. For some contracts, final bonuses may also be paid. These bonuses are not guaranteed and can be withdrawn at any time.

The Group's aim is that, subject to meeting all contractual obligations and maintaining an adequate financial position, payouts on a participating policy (including any final bonus applying) should fairly reflect the experience of the HWPF applicable to such a policy, after any adjustments for smoothing, and any distribution of the residual estate deemed appropriate by the Group.

When setting payout levels, the Group seeks to ensure fair treatment between those participating policyholders who choose to withdraw and those who remain. 

Asset shares are used as a tool to determine fair treatment. The calculation of asset shares varies between products, for example calculations can be on the basis of representative policies or on an individual policy basis.

The methodology and parameters used in payout calculations may, of necessity, involve some measure of approximation. The Group reviews regularly the methodology and parameters used and sets parameters on bases appropriate for the participating class and/or internal fund concerned.

In normal circumstances the Group seeks to offer some smoothing of investment returns to participating policyholders at the time of claims due to maturity for life policies or for pension policies where the Group has no right to reduce benefits as defined in the relevant contractual terms and conditions. The Group may, at its discretion, also provide some smoothing of investment returns for death claims and some types of withdrawal at the time of payment. The Group aims to operate smoothing of investment returns in such a way as to be neutral for participating policyholders as a whole over time. The Group monitors the anticipated cost of smoothing on a regular basis and, in most circumstances, will reflect the costs in payouts and in some circumstances adjust the approach to smoothing.

When calculating asset shares, the Group may, at its discretion, make fair deductions to reflect its assessment of the cost of guarantees. The Group takes an allowance for the assessed costs of guarantees when determining final bonuses payable on claims, calculating policy switch values and calculating surrender and transfer values. These allowances vary between types of policies, reflecting the nature of the guarantees provided. These allowances are kept under review. A deduction is also taken from participating asset shares determined on an expense basis of 0.5% pa as a contribution to the capital of the HWPF.

Eligible policies covered by the Mortgage Endowment Promise may receive 'top up' amounts, in accordance with the Scheme.

UK conventional with profits contracts (no impact on equity holder profits in the absence of burnthrough)

Conventional (i.e. non-unitised) with profits contracts consist of single or regular premium endowment, whole life and pension contracts held in the HWPF.

Under endowment and whole life contracts, guaranteed benefits are payable on death. Regular bonuses may be added to the guaranteed sum assured over the term of the policy and, in addition, a final bonus may be paid on death and maturity. Certain endowment assurances have minimum surrender value provisions and minimum paid-up values.

Under pension contracts, a minimum level of benefit is set at the outset and applies at the date(s) specified in the policy, for example under pure endowment contracts. Regular bonuses may be added to this initial minimum over the term of the policy and, in addition, a final bonus may be paid. Guaranteed annuity options providing for payment of a minimum annuity, in lieu of a cash sum, are available under pure endowment contracts. Under some of these contracts the guarantee applies only at the maturity date. Under other contracts, the option also applies for a specified period preceding the maturity date, in which case the sum assured and bonuses are reduced by specified factors and different guaranteed annuity rates apply.

All conventional with profits contracts are classified as participating insurance contracts.

UK and Irish unitised with profits pension contracts (fee business via RCF)

This class of business comprises single or regular premium contracts held in the HWPF under which a percentage of the premium is used to allocate units on a participating basis. Such contracts include hybrid contracts (see Note 33) resulting in the unitised with profits investment elements being classified as participating investment contracts, although there are some contracts that are classified as participating insurance contracts, for example those with guaranteed minimum pensions. The major unitised with profits pension contracts include Individual Personal Pension Plans (retail), Group Personal Pension Plans, Executive Pensions and Stakeholder (corporate) and Trustee Investment Plans (institutional).

The significant options and guarantees under these contracts are the following:

·   Contracts where, subject to specified conditions, it is guaranteed either that the unit price will rise at an annual rate of at least 4% per year or that the unit price will not fall and that there will be no unit price adjustment (UPA) at specified retirement dates or death

·   Certain Trustee Investment Plan contracts where, subject to specified conditions and limits, it is guaranteed that there will be no unit price adjustment (UPA) when units are encashed

UK and Irish unitised with profits life contracts (fee business via RCF)

Unitised with profits life business comprises single or regular premium endowment and whole life contracts held in the HWPF under which a percentage of the premium is used to allocate units on a participating basis. The death benefit under regular premium contracts is the greater of the bid value of units allocated and sum assured under the contract. Some contracts also contain critical illness cover providing for payment of a critical illness sum assured on diagnosis of certain defined serious illnesses. These contracts, principally Homeplan, With Profits Bonds and Versatile Investment Plans, are classified as participating insurance contracts.

The significant options and guarantees under these contracts are the following:

·   Contracts where, subject to specified conditions, it is guaranteed on death and maturity either that the unit price will rise at an annual rate of at least 3% a year or that the unit price will not fall, and, that there will be no UPA at maturity

·   For bonds it is guaranteed that no UPA will apply on regular withdrawals up to certain specified limits

Under contracts effected in connection with house purchase, the death benefit is guaranteed. Under other regular premium contracts, at any time after the first 10 years, the Group may review the status of the contract and, if it deems it necessary, the sum assured may be reduced, within the limits permitted.

Under some contracts effected in connection with house purchase, provided the original contract is still in force, the following options can normally be exercised at any time before the 55^th birthday of the life assured:

·   Future insurability option under which a new contract can be effected on then current premium rates, in connection with a further loan, up to the level of life and basic critical illness cover available on the original contract, without any further evidence of health

·   Term extension option on then current premium rates under which the term of the contract may be extended by a whole number of years if the lender agrees to extend the term of the loan

German unitised with profits contracts (fee business via German additional expenses basis)

Unitised with profits German contracts held in the HWPF mainly consist of endowment assurances and deferred annuities, under which a percentage of each premium is applied to purchase units on a participating basis. The death benefit under endowment assurances is the greater of the sum assured on death or 105% of the current surrender value. The death benefit under deferred annuities is the greater of the sum assured on death, 100% of the current surrender value, the nominal fund and, for regular premium paying contracts and certain single premium contracts, a refund of premiums. These contracts are classified as participating insurance contracts.

The maturity value, and for certain contracts the surrender benefits, are subject to guaranteed minimum amounts. For some participating unitised policies it is guaranteed that there will be no UPA on claims on or after the surrender option date. Certain contracts are subject to guaranteed annuity amounts or guaranteed annuity factors. In addition certain unit prices in the HWPF are guaranteed not to decrease.

UK and Irish unit linked pension contracts (fee business via RCF)

This class of business comprises single or regular premium contracts under which a percentage of the premium is used to allocate units in one or more unit linked funds held in the PBF. Such contracts include hybrid contracts (see Note 33) resulting in the unit linked investment elements being classified as non-participating investment contracts. The major unit linked pension contracts include Individual Personal Pension Plans (retail), Group Personal Pension Plans, Executive Pensions and Stakeholder (corporate) and Trustee Investment Plans (institutional).

The costs of contracts invested in unit linked funds are recovered by deduction of asset management charges from the unit linked funds which are transferred from the PBF to the HWPF. Under Stakeholder contracts, this asset management charge has a maximum limit. There are no other guarantees on these contracts with the exception that the unit prices of certain cash funds are guaranteed not to fall.

UK and Irish unit linked life contracts (fee business via RCF)

This class of business comprises principally unit linked investment bonds (e.g. Capital Investment Bonds), classified as non-participating investment contracts and the unit linked investment element of Homeplan contracts, classified as non-participating insurance contracts. No significant guarantees, other than the guaranteed death benefit on Homeplan contracts, are provided under these contracts.

The costs of contracts invested in unit linked funds are recovered by deduction of asset management charges from the unit linked funds which are transferred from the PBF to the HWPF.

UK and Irish annuity-in-payment contracts (spread/risk business in relation to longevity risk transferred to PBF otherwise no impact on shareholder profits in absence of burnthrough)

This class of business consists of the same type of contracts described in (b)(i) and also includes the With Profit Pension Annuity (WPPA), under which changes to the level of annuity are based on a declared rate of return but reductions in the level of the annuity are limited. These contracts are classified as non-participating insurance contracts, except for the WPPA which is classified as a participating insurance contract.

SLAL has reinsured both the longevity and market risk arising on a portfolio of annuity-in-payment contracts held within the HWPF with Canada Life International Re (the reinsurer). In order to limit counterparty credit exposure, the reinsurer was required to deposit back an amount equal to the reinsurance premium of £6.3bn (referred to as 'the deposit'). Interest is payable on the deposit at a floating rate. In respect of this arrangement SLAL holds a ring fenced pool of assets within the HWPF. See Note 41(c) on credit exposure and Note 6 for further details of the deposit back. A floating charge over the ring fenced pool of assets has been granted to the reinsurer.

The longevity risk on certain non-participating annuity-in-payment contracts held in the HWPF has been transferred to the PBF. The market risk on certain annuities has been transferred to the PBF.

For those annuities in payment which increase at a predefined rate the total liability at 31 December 2015 is £2,869m (2014: £3,127m) and this represents approximately 33% (2014: 33%) of the total liability for UK annuity in payments contracts held within the HWPF.

The total liability at 31 December 2015 for RPI linked annuities in payment (including any guaranteed minimum rate of escalation) is £1,811m (2014: £1,972m) and this represents approximately 21% (2014: 21%) of the total liability for UK annuity contracts held within the HWPF. There is a subset of annuities where the RPI linked annuity payment cannot fall or is guaranteed to increase at a minimum rate; the majority of such annuities are those whose payment cannot fall.

UK other non-participating contracts (spread/risk business via RCF)

This class of business consists primarily of deferred annuities that provide guaranteed annuity payments from the retirement age associated with the relevant pension plan. The payments depend on the survival of a life or lives with or without a guarantee period and may reduce on a specified death or increase each year at a predefined rate or in line with the increase in UK RPI. These contracts are classified as non-participating insurance contracts.

(b)(iii) India and China - Insurance and investment contracts

Unit linked life contracts (fee business)

The main contract issued by SLA is the Harvest 101 product. This contract was closed to new business in 2015. It is a regular premium savings product with a term ranging from five to 25 years. The customer has the option to invest in unit linked funds offered by SLA and mutual funds and deposit accounts offered by other providers. The mutual funds and deposit accounts are recognised as assets by the Group and are classified as unit linked business along with a corresponding liability. On death of the life insured, a benefit of 101% of the fund value is paid. If the death is accidental then an additional benefit of 10% of the initial account value is paid subject to a USD10,000 cap. These contracts are classified as insurance contracts where it is considered that the accidental death benefit transfers significant insurance risk. No other guarantees apply to this contract.

(b)(iv) Canada - Insurance, investment and reinsurance contracts

The Canadian business is included as discontinued operations.

Annuity-in-payment contracts (spread/risk business)

This class of business consisted of single premium contracts that provided guaranteed annuity payments based on the survival of a life or lives or for a specified period. The majority of the portfolio was life contingent annuities and were classified as non-participating insurance contracts. However, there were some term certain annuities classified as investment contracts.

Universal Life contracts (fee business and spread/risk business)

The main Universal Life contract, Perspecta, was a non-participating whole life assurance contract. Perspecta was closed to new business in 2012. Premiums could have been invested in term investment funds, segregated funds or mutual funds. Premiums invested in term investment funds were placed on deposit at rates of interest guaranteed for periods from one day to 20 years. The rate offered was determined with reference to the financial conditions at the time of premium payment. The contract provided life cover and, in addition, on death the value of the segregated funds was guaranteed never to be less than 75% of premiums deposited into those funds, adjusted for expense charges and any withdrawals.

Registered and non-registered savings plans (fee business and spread/risk business)

This category comprised individual and group non-participating savings contracts. These contracts permitted investment into term funds or segregated funds.

Premiums invested in term funds were placed on deposit at rates of interest guaranteed for a selected term. The rate offered depended on financial conditions at the time of deposit. Proceeds at the end of a guarantee period could be reinvested at the then current rates. The components of contracts invested in term funds were classified as non-participating investment contracts, for all contracts sold prior to May 2014. Individual Ideal Savings term funds issued after 1 May 2014 had an accidental death benefit in the contract, and were therefore classified as non-participating insurance contracts.

Where premiums on individual contracts were invested in segregated funds a death benefit guarantee applied being the greater of the segregated fund value and 100% of the net deposits. In addition provided that the monies had been invested for a minimum of 10 years, the maturity benefit was the greater of the segregated fund value at the maturity date and 75% or 100% of premiums invested, depending on the guarantee option selected, less any cash values previously paid out. Otherwise the maturity benefit was the fund value. The components of individual contracts invested in segregated funds were classified as non-participating insurance contracts.

Where premiums on group contracts were invested in segregated funds, no guarantees on death or maturity were given. The components of group contracts invested in segregated funds were classified as non-participating investment contracts.

Registered retirement income plans (fee business and spread/risk business)

Registered retirement income plans were non-participating single premium contracts. These contracts permitted investment into term funds or segregated funds on a similar basis to the individual savings plans described above. Regular withdrawals were made from the account to provide an income during retirement. The policyholder may have varied the amounts withdrawn subject to the regulatory minimum. The components of contracts invested in term funds were classified as non-participating investment contracts. The components of individual contracts invested in segregated funds were classified as non-participating insurance contracts.

Participating individual life contracts (no impact on equity holder profits in the absence of burnthrough)

Participating whole life and endowment assurance contracts contained scales of minimum guaranteed surrender values and paid-up policy amounts. Participating whole life contracts issued prior to 1985 included a guaranteed annuity rate option where the lump sum death benefit could be converted into an annuity on guaranteed terms or retained by SLCC whereupon the value accumulated at an annual interest rate of at least 2.5%.

Non-participating life contracts (spread/risk business)

This category comprised whole life and term assurance contracts where the guaranteed benefit was payable on death and was closed to new business. These contracts were classified as non-participating insurance contracts.

4.    Investment return

Gains and losses resulting from changes in both market value and foreign exchange on investments classified at fair value through profit or loss are recognised in the consolidated income statement in the period in which they occur.  The gains and losses include investment income received such as interest payments but exclude dividend income.  Dividend income is separately recognised in the consolidated income statement when the right to receive payment is established.

Interest income on financial instruments classified as available-for-sale or loans and receivables is separately recognised in the consolidated income statement using the effective interest rate method. The effective interest rate method allocates interest and other finance costs at a constant rate over the expected life of the financial instrument, or where appropriate a shorter period, by using as the interest rate the rate that exactly discounts the future cash receipts over the expected life to the net carrying value of the instrument.

Rental income from investment property is recognised in the consolidated income statement on a straight-line basis over the term of the lease. Lease incentives granted such as rent free periods are recognised as an integral part of the total rental income and are spread over the term of the lease.

		2015	2014
	Notes	£m	£m
Interest and similar income
Cash and cash equivalents and available-for-sale debt securities		109	80
Loans		4	7
		113	87
Dividend income		1,902	1,840
Gains/(losses) on financial instruments at fair value through profit or loss
Associates (other than dividend income)		204	100
Equity securities (other than dividend income)		1,131	1,522
Debt securities		(27)	6,086
Derivative financial instruments		1,179	2,243
		2,487	9,951
Foreign exchange gains on instruments other than those at fair value through profit or loss		19	26
Income from investment property
Rental income	19	487	450
Net fair value gains on investment property	19	452	825
		939	1,275
Investment return from continuing operations		5,460	13,179

5.    Fee income

Fee income from investment contracts, fund platforms and third party funds under management relates to the provision of investment management and administration services, and is recognised as services are provided and it is almost certain that the fee income will be received. Where fee income is received in advance (front-end fees), this income is deferred and recognised as a deferred income liability until the services have been provided (see Note 38).

		2015	2014
	Notes	£m	£m
Fee income from investment contracts and fund platforms		622	619
Fee income from third party funds under management		438	305
Fee income deferred during the year	38	(25)	(35)
Amortisation of deferred income	38	63	66
Release of deferred income	38	-	5
Other fee income		22	25
Total fee income from continuing operations		1,120	985

6.    Expenses under arrangements with reinsurers

Expenses, including interest, arising under elements of contracts with reinsurers that do not transfer significant insurance risk are recognised on an accruals basis in the consolidated income statement as expenses under arrangements with reinsurers.

	2015	2014
	£m	£m
Interest payable on deposits from reinsurers	34	32
Premium Adjustments	8	607
Expenses under arrangements with reinsurers from continuing operations	42	639

The Group has reinsured the longevity and investment risk related to a portfolio of annuity contracts held within its Heritage With Profits Fund. At inception of the reinsurance contract the reinsurer was required to deposit an amount equal to the reinsurance premium with the Group. Interest is payable on the deposit at a floating rate. The Group maintains a ring fenced pool of assets to back this deposit liability. Annuity payments under the reinsured contracts are made by the Group from the ring fenced assets and the deposit liability is reduced by the amount of these payments. Periodically the Group is required to pay to the reinsurer or receive from the reinsurer Premium Adjustments defined as the difference between the value of the ring fenced assets and the deposit amount, which has the effect of ensuring that the investment risk on the ring fenced pool of assets falls on the reinsurer.

7.    Other administrative expenses

		2015	2014
	Notes	£m	£m
Interest expense		12	11
Commission expenses		170	234
Staff costs and other employee-related costs	8	635	577
Operating lease rentals		21	30
Auditors' remuneration	9	7	7
Depreciation of property, plant and equipment	20	16	14
Impairment losses on property, plant and equipment	20	4	-
Impairment losses reversed on property, plant and equipment	20	(5)	(4)
Amortisation of intangible assets	16	51	41
Impairment losses on intangible assets	16	9	47
Other		506	457
		1,426	1,414
Acquisition costs deferred during the year	17	(83)	(143)
Impairment of deferred acquisition costs	17	73	9
Amortisation of deferred acquisition costs	17	124	150
Total other administrative expenses from continuing operations		1,540	1,430

In addition to interest expense from continuing operations of £12m (2014: £11m), interest expense of £83m (2014: £98m) was incurred in respect of subordinated liabilities and £34m (2014: £32m) in respect of deposits from reinsurers. For the year ended 31 December 2015, total interest expense from continuing operations is £129m (2014: £141m).

8.    Staff costs and other employee-related costs

		2015			2014
		Continuing operations	Discontinued operations	Total	Continuing operations	Discontinued operations	Total
	Notes	£m	£m	£m	£m	£m	£m
The aggregate remuneration payable in respect of employees:
Wages and salaries		491	12	503	456	114	570
Social security costs		57	1	58	55	9	64
Pension costs	37
Defined benefit plans		25	2	27	24	15	39
Defined contribution plans		27	-	27	15	3	18
Employee share-based payments	47	35	1	36	27	2	29
Total staff costs and other employee-related costs		635	16	651	577	143	720

	2015	2014
The average number of staff employed by the Group during the year:
Standard Life Investments1	1,496	1,322
UK and Europe	4,003	3,986
India and China	249	263
Other2	518	773
Canada1	165	1,991
Total average number of staff employed	6,431	8,335

¹    Includes all staff employed by the Canadian business including Standard Life Investments Inc. until its sale on 30 January 2015.

²      Includes staff in group corporate centre and group information technology. 

Information in respect of Directors' remuneration is provided in the Directors' remuneration report on pages 75 to 98.

9.    Auditors' remuneration

	2015			2014
	Continuing operations	Discontinued operations	Total	Continuing operations	Discontinued operations	Total
	£m	£m	£m	£m	£m	£m
Fees payable to the Company's auditors for the audit of the Company's individual and consolidated financial statements	0.3	-	0.3	0.3	-	0.3
Fees payable to the Company's auditors for other services
The audit of the Company's consolidated subsidiaries pursuant to legislation	3.4	-	3.4	3.3	1.1	4.4
The audit of funds not consolidated in the Group's financial statements	0.7	-	0.7	0.6	0.3	0.9
Audit related assurance services	1.6	-	1.6	0.6	-	0.6
Total audit related assurance fees	6.0	-	6.0	4.8	1.4	6.2
Other assurance services	0.5	-	0.5	1.3	0.7	2.0
Tax compliance services	0.4	-	0.4	0.1	-	0.1
Tax advisory services	0.1	-	0.1	0.3	-	0.3
Other non-audit fee services	0.3	-	0.3	0.1	-	0.1
Total non-audit fees	1.3	-	1.3	1.8	0.7	2.5
Total auditors' remuneration	7.3	-	7.3	6.6	2.1	8.7

Audit related assurance services in 2015 include fees relating to Solvency II assurance services. For more information on non-audit services, refer to the Report from the Chairman of the Audit Committee in Section 4 - Corporate governance statement.

During the year, the Group incurred audit fees in respect of the UK staff defined benefit plan of £52,500 (2014: £48,500).

10.  Restructuring and corporate transaction expenses

Total restructuring and corporate transaction expenses incurred from continuing operations during the year were £88m (2014: £106m). The expenses relate to Ignis integration, UK and Europe restructuring programmes, Solvency II and the closure of the Dubai and Singapore businesses. Deal costs relating to acquisitions included in restructuring and corporate transaction expenses for the year ended 31 December 2015 were £nil (2014: £11m).

In December 2014 the Group announced that the UK staff defined benefit pension plan would be closed to future accrual effective April 2016. All employees in the closing plan will be transferred to the UK defined contribution plan for future service and employer contributions into the defined contribution plan will be amended. Following this restructuring of the pension plans, operating profit from continuing operations for the year ended 31 December 2015 has been increased by £35m (2014: £15m) so that operating profit reflects the expected long-term pension expense for the period and is therefore more indicative of the long-term operating performance of the Group. As a result £35m (2014: £15m) of pension costs that are included in staff costs in the consolidated income statement for the year ended 31 December 2015, are included in restructuring and corporate transaction expenses in determining operating profit from continuing operations. 

The table below reconciles restructuring and corporate transaction expenses incurred from continuing operations with restructuring and corporate transaction expenses used to determine operating profit from continuing operations.

	2015	2014
	£m	£m
Restructuring and corporate transaction expenses from continuing operations	88	106
Pension plan restructuring	35	15
Expenses incurred by the Heritage With Profit Fund	(1)	(2)
Closure of Dubai1	-	(10)
Closure of Singapore1	(7)	-
Restructuring and corporate transaction expenses used to determine operating profit from continuing operations	115	109

¹    Dubai and Singapore businesses, the closure of which were announced in November 2014 and June 2015 respectively, are included as discontinued operations for segmental reporting purposes under IFRS 8 as this is reflective of the presentation of information provided to the Chief Operating Decision Maker. Under IFRS 5, Dubai and Singapore do not constitute discontinued operations and are included under continuing operations in the consolidated income statement.

Restructuring and corporate transaction expenses of £10m (2014: £31m) are used to determine operating profit before tax from discontinuing operations. These expenses relate to the sale of the Canadian business and the closure of the Dubai and Singapore businesses.

11.  Taxation

The Group's tax expense comprises both current tax and deferred tax expense.

Current tax is payable on taxable profit, as adjusted for items that are not taxable or tax deductible.

A deferred tax asset represents a tax deduction that is expected to arise in a future period. It is only recognised to the extent that there is expected to be future taxable profit or investment return to offset the tax deduction. A deferred tax liability represents taxes which will become payable in a future period as a result of a current or prior year transaction. Where local tax law allows, deferred tax assets and liabilities are netted off on the statement of financial position. The tax rates used to determine deferred tax are those enacted or substantively enacted at the reporting date.

Deferred tax is recognised on temporary differences arising from investments in subsidiaries and associates only when it is expected that the temporary difference will reverse in the foreseeable future and the timing of the reversal is not in our control.

Current tax and deferred tax is recognised in the consolidated income statement except when it relates to items recognised in other comprehensive income or directly in equity, in which case it is credited or charged to other comprehensive income or directly to equity respectively.

The Group provides additional disclosure in relation to the total tax expense. Certain products are subject to tax on policyholders' investment returns. This tax, 'policyholder tax', is accounted for as an element of income tax. To make the tax expense disclosure more meaningful, we disclose policyholder tax and tax payable on equity holders' profits separately. The policyholder tax expense is the amount payable in the year plus the movement of amounts expected to be payable in future years by policyholders on their investment return. The remainder of the tax expense is attributed to equity holders as tax payable on equity holders' profit.

(a)       Tax charge in the consolidated income statement

(a)(i)   Current year tax expense

		2015	2014
		£m	£m
Current tax:
UK		197	268
Double tax relief		(2)	-
Overseas		15	14
Adjustment to tax expense in respect of prior years		12	(7)
Total current tax attributable to continuing operations		222	275
Deferred tax:
Deferred tax expense arising from the current year		(11)	17
Total deferred tax attributable to continuing operations		(11)	17
Total tax expense attributable to continuing operations		211	292
Attributable to policyholders' investment return		134	250
Attributable to equity holders' profits		77	42
Total tax expense attributable to continuing operations		211	292

The share of associates' and joint ventures' tax expense from continuing operations is £13m (2014: £5m) and is included in profit before tax in the consolidated income statement in 'Share of profit from associates and joint ventures'.

In 2015 unrecognised tax losses from previous years of £1m (2014: £nil) were used to reduce the current tax expense. Unrecognised losses and timing differences of £nil were used to reduce the deferred tax expense (2014: £10m).

Current tax recoverable and current tax liabilities at 31 December 2015 were £168m (2014: £191m) and £113m (2014: £172m) respectively. Current tax assets and liabilities at 31 December 2015 and 31 December 2014 are expected to be recoverable or payable in less than 12 months.

(a)(ii)  Reconciliation of tax expense

		2015	2014
		£m	£m
Profit before tax from continuing operations		549	672
Tax at 20.25% (2014: 21.5%)		111	144
Policyholder tax (net of tax at UK standard rate)		107	196
Permanent differences		(4)	8
Temporary differences		-	(3)
Tax effect of accounting for share of profit from associates and joint ventures		(9)	(8)
Different tax rates		(19)	(28)
Adjustment to current tax expense in respect of prior years		12	(7)
Recognition of previously unrecognised tax credit		(2)	(10)
Deferred tax not recognised		18	(1)
Adjustment to deferred tax expense in respect of prior years		(4)	(6)
Write-down of deferred tax asset		5	3
Other		(4)	4
Total tax expense from continuing operations for the year		211	292

The standard rate of UK corporation tax changed from 21% to 20% with effect from 1 April 2015. Accordingly, the effective tax rate for the accounting period is 20.25% (2014: 21.5%). The UK tax rate will reduce to 19% from 1 April 2017 and 18% from 1 April 2020. These future rate changes have been taken into account in the calculation of the UK deferred tax balance at 31 December 2015.

(b)      Tax relating to components of other comprehensive income

Tax relating to components of other comprehensive income from continuing operations is as follows:

		2015	2014
		£m	£m
Current tax on net change in financial assets designated as available-for-sale		(2)	6
Equity holder tax effect relating to items that may be reclassified subsequently to profit or loss		(2)	6
Tax relating to each component of other comprehensive income from continuing operations		(2)	6

All of the amounts presented above are in respect of equity holders of Standard Life plc.

(c)      Tax relating to items taken directly to equity

		2015	2014
		£m	£m
Tax credit on reserves for employee share-based payments		(4)	(5)
Tax relating to items taken directly to equity		(4)	(5)

(d)      Deferred tax assets and liabilities

(d)(i)  Movements in net deferred tax liabilities

		2015	2014
		£m	£m
At 1 January		(181)	(57)
Reclassified as held for sale		-	(74)
Acquired through business combinations		-	(34)
Amounts charged to the consolidated income statement		11	(17)
Amounts credited directly to equity in respect of employee share-based payment schemes		4	5
Transfer to current tax for vested employee share-based payment schemes		(5)	(6)
Foreign exchange adjustment		1	1
Other		-	1
Net deferred tax liability at 31 December		(170)	(181)

(d)(ii) Analysis of recognised deferred tax

		2015	2014
		£m	£m
Deferred tax assets comprise:
Actuarial liabilities		5	5
Losses carried forward		9	9
Realised losses on investments		-	1
Depreciable assets		38	40
Deferred income		20	30
Employee benefits		25	23
Provisions and other temporary timing differences		13	-
Insurance related items		12	13
Other		5	-
Gross deferred tax assets		127	121
Less: Offset against deferred tax liabilities		(92)	(88)
Deferred tax assets		35	33
Deferred tax liabilities comprise:
Insurance related items		6	2
Unrealised gains on investments		148	141
Intangible assets acquired through business combinations		25	30
Deferred acquisition costs		111	121
Temporary timing differences		3	4
Other		4	4
Gross deferred tax liabilities		297	302
Less: Offset against deferred tax assets		(92)	(88)
Deferred tax liabilities		205	214
Net deferred tax liability at 31 December		(170)	(181)

A deferred tax asset of £9m (2014: £10m) for the Group has been recognised in respect of losses of various subsidiaries and unrealised losses on investments. Deferred tax assets are recognised to the extent that it is probable that the losses will be capable of being offset against taxable profits and gains in future periods. The value attributed to them takes into account the certainty or otherwise of their recoverability. Their recoverability is measured against the reversal of deferred tax liabilities and anticipated taxable profits and gains based on business plans. The losses do not have an expiry date.

Deferred tax assets and liabilities are expected to be recovered or settled after more than 12 months.

(e)       Unrecognised deferred tax

Due to uncertainty regarding recoverability, deferred tax has not been recognised in respect of the following assets:

·   Cumulative losses carried forward of £215m (2014: £126m)

·   Tax reserves of the German branch of Standard Life Assurance Limited of £26m (2014: £37m)

·   Unrealised investment losses of £20m (2014: £17m)

12.  Discontinued operations

The Group classifies as discontinued operations areas of business which have been disposed of or are classified as held for sale at the year end and which either, represent a separate major line of business or geographical area, or are part of a plan to dispose of one. The results of discontinued operations are shown separately on the face of the consolidated income statement from the results of the remaining (continuing) parts of the Group's business.

Discontinued operations for the years ended 31 December 2015 and 31 December 2014 relate solely to the Group's Canadian business. As discussed in Note 1, the sale of Standard Life Financial Inc. and Standard Life Investments Inc. completed on 30 January 2015 and the results of these operations until that date and the gain on their disposal are included in discontinued operations. The results of the SLAL Canada Branch, the assets and liabilities of which were transferred on 31 December 2015 are also included until that date. 

The consolidated income statement, other comprehensive income and cash flows from discontinued operations are shown below.

		2015	2014
Consolidated income statement	Notes	£m	£m
Revenue
Gross earned premium		138	1,720
Premium ceded to reinsurers		(43)	(36)
Net earned premium		95	1,684
Investment return		1,166	2,914
Fee income		11	124
Gain on sale of subsidiaries	1	1,102	-
Other income		1	17
Total revenue from discontinued operations		2,375	4,739
Expenses
Claims and benefits paid		123	1,121
Claim recoveries from reinsurers		(63)	(29)
Net insurance benefits and claims		60	1,092
Change in reinsurance assets and liabilities		45	(36)
Change in insurance and participating contract liabilities		507	1,548
Change in non-participating investment contract liabilities		525	1,403
Administrative expenses
Restructuring and corporate transaction expenses		3	21
Other administrative expenses		37	430
Total administrative expenses		40	451
Change in liability for third party interest in consolidated funds		30	80
Finance costs		1	9
Total expenses from discontinued operations		1,208	4,547
Share of loss from associates and joint ventures		-	(4)
Profit before tax from discontinued operations		1,167	188
Tax expense attributable to policyholders' returns		-	-
Profit before tax expense attributable to equity holders' profits		1,167	188
Total tax expense		20	61
Less: Tax attributable to policyholders' returns		-	-
Tax expense attributable to equity holders' profits		20	61
Profit for the year from discontinued operations		1,147	127
Attributable to:
Equity holders of Standard Life plc		1,147	127
Non-controlling interests		-	-
		1,147	127

	2015	2014
Other comprehensive income	£m	£m
Items that will not be reclassified subsequently to profit or loss:
Remeasurement losses on defined benefit pension plans	(19)	(20)
Revaluation of owner occupied property	-	(2)
Equity holder tax effect relating to items that will not be reclassified subsequently to profit or loss	5	5
Total items that will not be reclassified subsequently to profit or loss	(14)	(17)
Items that may be reclassified subsequently to profit or loss:
Fair value gains on cash flow hedges	58	2
Net investment hedge	57	16
Fair value gains on available-for-sale financial assets	15	22
Exchange differences on translating foreign operations	(62)	(36)
Equity holder tax effect relating to items that may be reclassified subsequently to profit or loss	(4)	(5)
Total items that may be reclassified subsequently to profit or loss	64	(1)
Items that were transferred to profit or loss on disposal of subsidiaries:
Release of available-for-sale financial assets reserve	(17)	-
Release of cash flow hedges reserve	(60)	-
Release of net investment hedge reserve	(110)	-
Release of foreign currency translation reserve	(50)	-
Total items that were transferred to profit or loss on disposal of subsidiaries	(237)	-
Other comprehensive income/(expense) for the year from discontinued operations	(187)	(18)

	2015	2014
Cash flows	£m	£m
Net cash flows from operating activities	(132)	117
Net cash flows from financing activities	(7)	(1)
Net cash flows from investing activities	(500)	(65)
Total net cash flows	(639)	51

The net cash flows from investing activities for year ended 31 December 2015 represents the cash and cash equivalents of the operations disposed of at the date of disposal and do not include cash consideration received of £2,100m.

13.  Earnings per share

Basic earnings per share is calculated by dividing profit attributable to ordinary equity holders by the weighted average number of ordinary shares in issue during the year excluding shares owned by the employee trusts that have not vested unconditionally to employees.

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue during the year to assume the conversion of all dilutive potential ordinary shares, such as share options granted to employees.

Alternative earnings per share is calculated on operating profit after tax. The Directors believe that earnings per share based on operating profit provides a more useful indication of the long-term operating performance of the Group.

Basic earnings per share was 69.4p (2014: 21.1p) and diluted earnings per share was 69.1p (2014: 21.0p) for the year ended 31 December 2015. The following table shows the split between continuing and discontinued operations, and details of alternative earnings per share.

	2015		2014
	Continuing operations	Discontinued operations	Continuing operations	Discontinued operations
	£m	£m	£m	£m
Operating profit before tax	665	3	608	127
Tax on operating profit	(114)	-	(82)	(42)
Share of associates' and joint ventures' tax expense	(13)	-	(5)	-
Operating profit after tax	538	3	521	85
Adjusted for the following items
Short-term fluctuations in investment return and economic assumption changes	(63)	63	17	71
Restructuring and corporate transaction expenses	(115)	(10)	(109)	(31)
Impairment of intangible assets	(7)	(2)	(43)	(4)
Gain on sale of Canadian business	-	1,102	-	-
Other	(72)	(31)	(22)	(3)
Total non-operating items	(257)	1,122	(157)	33
Tax on non-operating items	37	(20)	40	(19)
Dubai included in discontinued operations segment1	-	-	(22)	22
Singapore included in discontinued operations segment1	(42)	42	(6)	6
Profit attributable to equity holders of Standard Life plc	276	1,147	376	127
	Millions	Millions	Millions	Millions
Weighted average number of ordinary shares outstanding	2,051	2,051	2,384	2,384
Dilutive effect of share options and awards	9	9	12	12
Weighted average number of diluted ordinary shares outstanding	2,060	2,060	2,396	2,396
	Pence	Pence	Pence	Pence
Basic earnings per share	13.5	55.9	15.8	5.3
Diluted earnings per share	13.4	55.7	15.7	5.3
Alternative earnings per share (post tax)	26.2	0.1	21.9	3.6
Diluted alternative earnings per share (post tax)	26.1	0.1	21.7	3.5

¹    Dubai and Singapore businesses, the closure of which was announced in November 2014 and June 2015 respectively, are included as discontinued operations for segmental reporting purposes under IFRS 8 as this is reflective of the presentation of information provided to the Chief Operating Decision Maker. Under IFRS 5, Dubai and Singapore do not constitute discontinued operations and are included under continuing operations in the consolidated income statement. Therefore the analysis of Group operating profit above includes the reclassification of Dubai and Singapore results between discontinued and continuing operations.

Details of share options and awards which have a dilutive effect are provided in Note 47.

As discussed in Note 28 the Company undertook a share consolidation during the year followed by a return of value to shareholders. In accordance with IAS 33, earnings per share have not been restated following the share consolidation as there was an overall corresponding change in resources. As a result of the share consolidation earnings per share from continuing operations for the year ended 31 December 2015 is not directly comparable with the prior year.

14.  Operating profit and non-operating items

Operating profit is the Group's chosen supplementary measure of performance. Operating profit excludes impacts arising from short-term fluctuations in investment return and economic assumption changes. It is calculated based on expected returns on investments backing equity holder funds, with consistent allowance for the corresponding expected movements in equity holder liabilities. Impacts arising from the difference between the expected return and actual return on investments, and the corresponding impact on equity holder liabilities except where they are directly related to a significant management action, are excluded from operating profit and are presented within profit before tax. The impact of certain changes in economic assumptions is also excluded from operating profit and is presented within profit before tax.

Operating profit also excludes the impact of the following items:

·   Restructuring costs and significant corporate transaction expenses. Restructuring includes the impact of major regulatory change.

·   Impairment of intangible assets

·   Profit or loss arising on the disposal of a subsidiary, joint venture or associate

·   Amortisation of intangibles acquired in business combinations and fair value movements in contingent consideration

·   Items which are one-off in nature and outside the control of management and which, due to their size or nature, are not indicative of the long-term operating performance of the Group

From 2016 onwards we intend to make a change to the operating profit accounting policy so that items which, due to their size or nature, are not indicative of the long-term operating performance of the Group are excluded from operating profit (even if they are within the control of management). The objective of the change is to make operating profit a more useful indication of the long-term performance of the Group.

(a)     Short-term fluctuations in investment return and economic assumptions changes

The components of IFRS profit attributable to market movements and interest rate changes which give rise to variances between actual and expected investment returns, as well as the impact of changes in economic assumptions on equity holder liabilities, are excluded from operating profit.

The expected rates of return for debt securities, equity securities and property are determined separately for each of the Group's operations. The expected rates of return for equity securities and property, with the exception of the Canadian operations, are determined based on the gilt spot rates of an appropriate duration plus an equity risk premium or property risk premium, respectively. The expected rates of return on equity securities and property for Canadian operations included in discontinued operations were determined by the Appointed Actuary in Canada until the sale of the Canadian business on 30 January 2015.

The principal assumptions, as set at the start of the year, in respect of gross investment returns underlying the calculation of the expected investment return for equity securities and property are as follows:

	2015		2014
	UK	Canada	UK	Canada
	%	%	%	%
Equity securities	4.86	8.60	6.01	8.60
Property	3.86	8.60	5.01	8.60

In respect of debt securities at fair value through profit or loss, the expected rate of return is determined based on the average prospective yields for the debt securities actually held or, in respect of the Canadian operations was determined by the Appointed Actuary in Canada. For debt securities classified as available-for-sale that support liabilities measured at amortised cost, the expected rate of return is the effective interest rate adjusted for an allowance, established at initial recognition, for expected defaults. If debt securities classified as available-for-sale are sold, any gain or loss is amortised within the expected return over the period to the earlier of the maturity date of the sold debt security, or the redemption date of the supported liability.

Gains and losses on foreign exchange are deemed to represent short-term fluctuations in investment return and economic assumption changes and thus are excluded from operating profit.

For the year ended 31 December 2015, short-term fluctuations in investment return and economic assumption changes resulted in losses of £63m (2014: £17m gains) from continuing operations and gains of £63m (2014: £71m gains) from discontinued operations. Short-term fluctuations in investment return from continuing operations relate principally to investment volatility in UK annuities, and in respect of the Group's subordinated liabilities and assets backing those liabilities. Short-term fluctuations in investment return from discontinued operations relate principally to investment volatility in Canada non-segregated funds.

(b)     Other

In the pro forma reconciliation of consolidated operating profit to profit for the year other non-operating includes:

·   The impact of restructuring on deferred acquisition costs, claims, and change in investment and insurance contract liabilities

·   Amortisation of intangibles acquired in business combinations and fair value movements in contingent consideration

Other non-operating items from continuing operations for the year ended 31 December 2015 includes £20m (2014: £15m) in relation to amortisation of intangible assets acquired through business combinations and £46m (2014: £nil) relating to a review of expense and reserving assumptions in Hong Kong following regulatory change. This Hong Kong non-operating restructuring loss primarily relates to an impairment of deferred acquisition costs.

Other non-operating items from discontinued operations includes £31m (2014: £nil) in respect of impairment of deferred acquisition costs and plan enhancements relating to the closure of the Singapore business.

15. Dividends and return of value

Dividends are distributions of profit to holders of Standard Life plc's share capital and as a result are recognised as a deduction in equity. Final dividends are announced with the Annual report and accounts and are recognised when they have been approved by shareholders. Interim dividends are announced with the Half year results and are recognised when they are paid.

	2015		2014
	Pence per share	£m	Pence per share	£m
Prior year's final dividend paid	11.43	224	10.58	252
Interim dividend paid	6.02	119	5.60	134
Total dividends paid on ordinary shares		343		386
Current year final recommended dividend	12.34	243

The final dividend for the year ended 31 December 2014 and subsequent dividends have been paid on the lower adjusted number of ordinary shares following the share consolidation.

The final recommended dividend will be paid on 24 May 2016 to shareholders on the Company's register as at 15 April 2016, subject to approval at the Annual General Meeting on 17 May 2016. After the current year final recommended dividend, the total dividend in respect of the year ended 31 December 2015 is 18.36p (2014: 17.03p).

In addition to the dividend distribution on ordinary shares, the Group returned 73 pence per ordinary share (£1,749m) to shareholders through a 'B/C' share scheme as discussed in Note 28.

16.  Intangible assets

Intangible assets are created when the Group acquires a business and the amount paid exceeds the value of the net tangible assets acquired. These assets are reflective of the additional value that the Group determines to be attached to the acquired business. Intangible assets acquired by the Group through business combinations consist mainly of investment management contracts and technology in place in acquired businesses. Any remaining value that cannot be identified as a separate intangible asset on acquisition is recognised as goodwill.

The Group has also recognised as intangible assets software which has been developed internally and other purchased technology which is used in managing and executing our business. Costs to develop software internally are capitalised after the research phase and when it has been established that the project is technically feasible and the Group has both the intention and ability to use the completed asset.

Intangible assets are recognised at cost and charged to the income statement on a straight-line basis over the length of time the Group expects to derive benefits from the asset. 

Goodwill is not charged to the income statement unless it becomes impaired. 

		Acquired through business combinations
		Goodwill	Investment management and customer contracts	Technology	Internally developed software	Purchased software	Total
	Notes	£m	£m	£m	£m	£m	£m
Gross amount
At 1 January 2014		111	29	30	202	57	429
Reclassified to held for sale during the year		-	-	-	-	(4)	(4)
Additions		105	208	-	33	10	356
Other		-	-	-	(1)	-	(1)
At 31 December 2014		216	237	30	234	63	780
Additions		3	3	-	55	3	64
Disposals and adjustments		-	-	-	(1)	-	(1)
Other		-	-	-	(1)	-	(1)
At 31 December 2015		219	240	30	287	66	842
Accumulated amortisation
At 1 January 2014		-	-	(18)	(93)	(18)	(129)
Reclassified to held for sale during the year		-	-	-	-	2	2
Amortisation charge for the year		-	(11)	(4)	(21)	(5)	(41)
Impairment losses recognised		-	(43)	-	(4)	-	(47)
At 31 December 2014		-	(54)	(22)	(118)	(21)	(215)
Amortisation charge for the year	7	-	(16)	(4)	(23)	(8)	(51)
Impairment losses recognised	7	-	(5)	-	(4)	-	(9)
Disposals and adjustments		-	-	-	1	-	1
Other		-	-	-	-	(2)	(2)
At 31 December 2015		-	(75)	(26)	(144)	(31)	(276)
Carrying amount
At 1 January 2014		111	29	12	109	39	300
At 31 December 2014		216	183	8	116	42	565
At 31 December 2015		219	165	4	143	35	566

The Group's goodwill has been acquired through a series of business combinations, most recently the acquisition of Pearson Jones plc in 2015 and Ignis in 2014. Of the Group's goodwill of £219m (2014: £216m) at 31 December 2015, £145m (2014: £145m) is attributed to the Standard Life Investments cash-generating unit. The remaining goodwill of £74m (2014: £71m) is attributable to a number of smaller cash-generating units in the UK and Europe segment.

Additions to investment management contracts acquired through business combinations during the year to 31 December 2014 related to the acquisition of Ignis and comprised life company contracts of £80m, institutional client contracts of £90m and retail client contracts of £38m. Each of these categories formed a cash-generating unit. The recoverable amount of the institutional client contracts cash-generating unit at 31 December 2015 was £36m (2014: £44m) which was its value in use. The impairment loss of £5m (2014: £43m) recognised during the year to 31 December 2015 relates to this decrease in recoverable amount.

Estimates and assumptions

The key estimates and assumptions in relation to intangible assets are:

·   Identification and valuation of intangible assets arising from business combinations

·   Determination of useful life

·   Determination of the recoverable amount in relation to impairment assessments

The identification of intangible assets arising from business combinations is considered as part of the acquisition and based on contractual relationships, technologies and brands in place in the acquired business. Measuring the fair value of these assets requires assumptions and judgements around expected future revenues, appropriate discount rates and the appropriate duration over which benefits are expected to be derived.

The determination of useful life requires judgement in respect of the length of time that the Group expects to derive benefits from the asset and considers for example expected duration of contractual relationships for investment management contracts acquired in business combinations and when technology is expected to become obsolete for technology based assets. The amortisation period for each of the Group's intangible asset categories is as follows:

·   Investment management and customer contracts acquired through business combinations - between 10 and 17 years

·   Technology acquired through business combinations - 6 years

·   Internally developed software - between 2 and 10 years. Amortisation commences once the asset is fully developed.

·   Purchased software - between 2 and 6 years

Intangible assets including goodwill are assessed for impairment at each reporting date. If the carrying value of an intangible asset exceeds its recoverable amount then the carrying value is written down to the recoverable amount.

The recoverable amount for intangible assets excluding goodwill is currently its value in use.  In assessing value in use, expected future cash flows are discounted to their present value using a pre-tax discount rate. Judgement is required in assessing both expected cash flows and an appropriate discount rate which is based on current market assessments of the time value of money and the risks associated with the asset.

The most significant judgements used in determining the recoverable amount for investment management contracts acquired in business combinations are estimated net flow projections and forecasted operating profit margins. Net flow projections are based on forecast information for the next five years and thereafter assumed no further net flows. The useful economic life of the intangible assets is between 10 and 15 years and therefore the projected cash flows used to determine value in use cover a period of longer than five years.

During 2014, subsequent to the acquisition of Ignis, there was a significant change in the management structure of the Absolute Return Government Bond Fund, which made up the majority of the institutional client contracts cash-generating unit carrying value. This resulted in outflows of assets under management and reduced projections of inflows and revenue, a consequential fall in the recoverable amount of this cash-generating unit, and an impairment loss of £43m in the year to 31 December 2014. During 2015, there were further outflows resulting in a further fall in recoverable amount and an impairment charge of £5m. The recoverable amount at 31 December 2015 has been calculated using a discount rate of 14% and an operating margin of 40%. The discount rate reflects the level of risk for these contracts and the operating margin is based on current experience.

Following the impairment the remaining carrying value of the institutional client contracts at 31 December 2015 is £36m (2014: £44m). Increasing the discount rate by 2% or decreasing the operating margin by 5% would result in an additional impairment loss of £3m or £5m respectively. Further if it was assumed that there would be no future inflows into the Absolute Return Government Bond Fund this would result in an additional impairment loss of £8m.

The carrying value of the retail client contracts at 31 December 2015 is £34m (2014: £36m). The recoverable amount of the retail contracts has been calculated using a discount rate of 11% and an operating margin of 40%. Increasing the discount rate by 2% or decreasing the operating margin by 5% would result in an impairment loss of £3m or £5m respectively.

The carrying value of the life client contracts at 31 December 2015 is £66m (2014: £77m). Increasing the discount rate by 2% or decreasing the operating margin by 5% would not result in an impairment loss and therefore would have no impact on profit after tax. The remaining amortisation period of the life contracts is 9 years.

Goodwill allocated to the Standard Life Investments cash-generating unit is significant in comparison with the total value of goodwill. The recoverable amount of this cash-generating unit is based on fair value less costs of disposal. The key assumption used to measure fair value is a price/earnings ratio which is derived from market price/earnings ratios of similar businesses to Standard Life Investments. This fair value measurement would be categorised as level 3 in the fair value hierarchy. A reasonably possible change in the price/earnings ratio would not result in an impairment.

17.  Deferred acquisition costs

The Group incurs costs to obtain and process new business. These are accounted for as follows:

UK and Europe - insurance and participating investment contracts

Acquisition costs incurred in issuing insurance or participating investment contracts are not deferred where such costs are borne by a with profits fund that was subject to the Prudential Regulation Authority (PRA) realistic capital regime. For other participating investment contracts, incremental costs directly attributable to the issue of the contracts are deferred. For other insurance contracts both incremental acquisition costs and other indirect costs of acquiring and processing new business, are deferred.

Deferred acquisition costs are amortised in proportion to projected margins over the period the relevant contracts are expected to remain in force. After initial recognition, deferred acquisition costs are reviewed by category of business and written off to the extent that they are no longer considered to be recoverable.

India and China - insurance contracts

The Group's policy for acquisition costs incurred on insurance contracts issued by overseas subsidiaries is to apply the policy used in the issuing entity's local statutory or regulatory reporting or, where local reporting did not explicitly or implicitly defer acquisition costs at the time the overseas subsidiary was first consolidated, to adjust those policies to apply a policy similar to that described above for non-participating insurance contracts.

Non-participating investment contracts and asset management contracts

Incremental costs directly attributable to securing rights to receive fees for asset management services either sold with unit linked investment contracts or in other asset management services contracts, are deferred. Where such costs are borne by a with profits fund that was subject to the PRA's realistic capital regime, deferral is limited to the level of any related deferred income.

Deferred acquisition costs are amortised over the life of the contracts as the related revenue is recognised. After initial recognition, deferred acquisition costs are reviewed by category of business and are written off to the extent that they are no longer considered to be recoverable.

Trail or renewal commission on non-participating investment contracts where the Group does not have an unconditional legal right to avoid payment, is deferred at inception of the contract and an offsetting liability for contingent commission is established.

		2015	2014
	Notes	£m	£m
At 1 January		771	905
Reclassified as held for sale during the year		-	(106)
Additions during the year	7	83	143
Amortisation charge	7	(124)	(150)
Impairment charge	7	(73)	(9)
Foreign exchange adjustment		(11)	(12)
At 31 December		646	771

The amount of deferred acquisition costs expected to be recovered after more than 12 months is £558m (2014: £676m). Included in deferred acquisition costs above are costs deferred on investment contracts (deferred origination costs) amounting to £411m (2014: £460m).

Included within the impairment charge of £73m (2014: £9m) is £59m (2014: £nil) in relation to an impairment of deferred acquisition costs in Hong Kong primarily as a result of a review of expense and reserving assumptions following regulatory change. The key non-economic assumptions used in the impairment testing of Hong Kong deferred acquisition costs were those relating to future persistency and expenses. The remaining impairment charge of £14m relates to impairment of deferred acquisition costs in Singapore (2014: £nil) resulting from the closure of the business. 

18.    Investments in associates and joint ventures

Associates are entities where the Group can significantly influence decisions made relating to the financial and operating policies of the entity but does not control the entity. For entities where voting rights exist, significant influence is presumed where the Group holds between 20% and 50% of the voting rights.

The Group also considers itself to have significant influence over investment vehicles where, through its role as investment manager, it has power over the investment decisions of the vehicle. As a result the Group classifies all Group managed investment vehicles which are not subsidiaries and in which the Group holds an investment, as associates even though it may hold less than 20% of the voting rights of the investment vehicle. Where the Group has an investment in an associate, a portion of which is held by, or is held indirectly through, a mutual fund, unit trust or similar entity, including investment-linked insurance funds, that portion of the investment is measured at fair value through profit or loss.

Joint ventures are strategic investments where the Group has agreed to share control of an entity's financial and operating policies through a shareholders' agreement and decisions can only be taken with unanimous consent.

Associates, other than those accounted for at fair value through profit or loss, and joint ventures are accounted for using the equity method from the date that significant influence or shared control, respectively, commences until the date this ceases with consistent accounting policies applied throughout.

Under the equity method, investments in associates and joint ventures are initially recognised at cost and include any goodwill identified on acquisition. The carrying value is adjusted for the Group's share of post-acquisition profit or loss and other comprehensive income of the associate or joint venture, which are recognised in the consolidated income statement and other comprehensive income respectively. The carrying value would also be adjusted for any impairment losses.

		2015	2014
	Notes	£m	£m
Investments in associates and joint ventures accounted for using the equity method		292	242
Investments in associates measured at FVTPL	21	5,425	4,264
Loans to associates and joint ventures	21	2	2
Total investments in associates and joint ventures		5,719	4,508

The level of future dividend payments and other transfers of funds to the Group from associates and joint ventures accounted for using the equity method could be restricted by the regulatory solvency and capital requirements of the associate or joint venture, and certain local foreign currency transaction restrictions.

(a)     Investments in associates

The following are particulars of the Group's principal associates, which are both unlisted:

	HDFC Standard Life Insurance Company Limited		HDFC Asset Management Company Limited
Country of incorporation and registration	India		India
	2015	2014	2015	2014
31 December	£m	£m	£m	£m
Summarised financial information of associate:
Revenue	1,961	2,371	127	94
Profit after tax	72	70	46	39
Other comprehensive income	-	2	-	-
Total assets	7,529	6,610	267	215
Total liabilities	7,228	6,366	131	105
Net assets	301	244	136	110
Interest held	26%	26%	40%	40%
Share of net assets	78	63	54	44
Carrying value of associate	115	86	87	73
Dividends received	5	4	7	3

HDFC Standard Life Insurance Company Limited was previously a joint venture of the Group. During the year ended 31 December 2015 changes were made to the shareholders' agreement so that the Group no longer has joint control of this entity. As a result, this entity is now classified as an associate of the Group.

The Group's interest in the HDFC Standard Life Insurance Company Limited has been built up over time to its current level of 26% (2014: 26%). The difference between the carrying value of this associate and the Group's current share of net assets is due to additional investments being made at fair value rather than book value.

In August 2015, the Group entered into a share and purchase agreement to purchase an additional 9% of the issued share capital of HDFC Standard Life Insurance Company Limited for a consideration of Rs 1,706 crore (£175m based on INR exchange rate as at 31 December 2015), increasing the Group's interest to 35%. The transaction is subject to satisfactory regulatory approvals. 

HDFC Asset Management Company Limited manages a range of mutual funds and provides portfolio management and advisory services. The Group's share of post-acquisition movements in reserves of HDFC Asset Management Company Limited which have been recognised directly in equity, have not been reflected in the carrying value of the associate. As a result there is a difference between the carrying value of the associate and the Group's share of net assets.

The reporting date for HDFC Asset Management Company Limited and HDFC Standard Life Insurance Company Limited is 31 March as this is their year end date. This is different from the Group's year end date of 31 December.

The Group also has investments in associates measured at FVTPL of £5,425m (2014: £4,264m), none of which are considered individually material to the Group as the investments are primarily held by unit linked and segregated funds. These associates have no significant contingent liabilities to which the Group is exposed and there are no restrictions that would prevent the transfer of funds to the Group (2014: none).

(b)     Investments in joint ventures

The following are particulars of the Group's principal joint venture which is unlisted:

			Heng An Standard Life Insurance Company
Country of incorporation and registration			China
			2015	2014
			£m	£m
Summarised financial information of joint venture:
Revenue			194	158
Profit after tax			8	3
Other comprehensive income			3	6
Total assets			963	857
Total liabilities			807	712
Net assets			156	145
Interest held			50%	50%
Current share of net assets			78	73
Carrying value of joint venture			78	73
Dividends received			-	-

19.  Investment property

Property held for long-term rental yields or investment gain that is not occupied by the Group and property being constructed or developed for future use as investment property are classified as investment property. Investment property is initially recognised at cost and subsequently measured at fair value. Gains or losses arising from changes in fair value are recognised in the consolidated income statement.

		2015	2014
	Notes	£m	£m
At 1 January		9,041	8,606
Reclassified as held for sale during the year		(87)	(1,297)
Additions - acquisitions		595	823
Additions - subsequent expenditure		267	210
Net fair value gains	4	452	825
Disposals		(290)	(128)
Foreign exchange adjustment		(8)	(14)
Other		21	16
At 31 December		9,991	9,041
The fair value of investment property can be analysed as:
Freehold		7,137	6,421
Long leasehold		2,788	2,558
Short leasehold		66	62
		9,991	9,041

The rental income arising from investment property during the year from continuing operations amounted to £487m (2014: £450m). Direct operating expenses (included within other administrative expenses) from continuing operations arising in respect of such rented property during the year amounted to £70m (2014: £73m).

Valuations are provided by independent qualified professional valuers at 31 December or as at a date that is not more than three months before 31 December. Where valuations have been undertaken at dates prior to the end of the reporting period, adjustments are made where appropriate to reflect the impact of changes in market conditions between the date of these valuations and the end of the reporting period.

Future minimum lease rental receivables in respect of non-cancellable operating leases on investment properties were as follows:

		2015	2014
		£m	£m
Not later than one year		478	485
Later than one year and no later than five years		1,563	1,344
Later than five years		4,105	3,481
Total operating lease receivables		6,146	5,310

Estimates and assumptions

Determination of the fair value of investment property is a key estimate. The methods and assumptions used to determine fair value of investment property are discussed in Note 43.

20. Property, plant and equipment

Property, plant and equipment consists primarily of property owned and occupied by the Group and the computer equipment used to carry out the Group's business and is initially recognised at cost.

Owner occupied property is revalued at each reporting date to the fair value as provided by the most recent independent valuation less any subsequent accumulated depreciation. The useful life of owner occupied property is considered as between 30 and 50 years. These properties are depreciated down to their estimated residual values over their useful life and therefore depreciation is only charged if the residual value expected at the end of the property's useful life is lower than the fair value.

Equipment is subsequently measured at cost less depreciation.  Depreciation is charged to the income statement over 2 to 15 years depending on the length of time the Group expects to derive benefit from the asset.

		Owner occupied property	Equipment	Total
	Notes	£m	£m	£m
Cost or valuation
At 1 January 2014		172	121	293
Reclassified as held for sale during the year		(43)	(9)	(52)
Additions		-	19	19
Disposals and adjustments1		-	(1)	(1)
Revaluations		5	-	5
Impairment losses reversed2	7	4	-	4
At 31 December 2014		138	130	268
Additions		-	8	8
Disposals and adjustments1		(92)	-	(92)
Revaluations		4	-	4
Impairment losses reversed2	7	5	-	5
At 31 December 2015		55	138	193
Accumulated depreciation
At 1 January 2014		-	(74)	(74)
Reclassified as held for sale during the year		-	5	5
Depreciation charge for the year	7	-	(14)	(14)
Disposals and adjustments1		-	1	1
At 31 December 2014		-	(82)	(82)
Depreciation charge for the year	7	-	(16)	(16)
Impairment losses recognised	7	-	(4)	(4)
At 31 December 2015		-	(102)	(102)
Carrying amount
At 1 January 2014		172	47	219
At 31 December 2014		138	48	186
At 31 December 2015		55	36	91

¹    For the year ended 31 December 2015 £nil (2014: £1m) of disposals and adjustments relates to equipment with net book value of £nil which is no longer in use.

²    The impairment losses reversed in respect of owner occupied property arose due to changes in the market value of a number of properties relative to their original deemed cost.

If owner occupied property was measured using the cost model, the historical cost before impairment would be £76m (2014: £155m). As the expected residual value of owner occupied property is in line with the current fair value, no depreciation is currently charged.

21. Financial investments

Management determines the classification of financial investments at initial recognition.  Financial investments which are not derivatives and are not designated at fair value through profit or loss (FVTPL) are classified as either available-for-sale (AFS) or loans and receivables. The classification of derivatives is set out in Note 23.

The majority of the Group's debt securities and all equity securities and interests in pooled investment funds are designated at FVTPL as they are part of groups of assets which are managed and whose performance is evaluated on a fair value basis. These investments are recognised at fair value with changes in fair value recognised in investment return in the consolidated income statement. Commercial real estate loans are included within debt securities designated at fair value.

All other debt securities are classified as AFS and are recognised at fair value with changes in fair value recognised in other comprehensive income. Interest is credited to the consolidated income statement using the effective interest rate method. On disposal of an AFS security any gains or losses previously recognised in other comprehensive income are recognised in the consolidated income statement (recycling).

The accounting policies for other financial investments are detailed in the separate related notes indicated below. 

		Designated as at fair value through profit or loss	Held for trading	Available-for-sale	Loans and receivables	Net investment hedge	Cash flow hedge	Total
2015	Notes	£m	£m	£m	£m	£m	£m	£m
Investments in associates and joint ventures	18	5,425	-	-	2	-	-	5,427
Loans	22	-	-	-	811	-	-	811
Derivative financial assets	23	-	2,444	-	-	-	-	2,444
Equity securities and interests in pooled investment funds	41	71,679	-	-	-	-	-	71,679
Debt securities	41	65,914	-	743	-	-	-	66,657
Receivables and other financial assets	24	15	-	-	1,432	-	-	1,447
Cash and cash equivalents	27	-	-	-	9,640	-	-	9,640
Total		143,033	2,444	743	11,885	-	-	158,105

		Designated as at fair value through profit or loss	Held for trading	Available-for-sale	Loans and receivables	Net investment hedge	Cash flow hedge	Total
2014	Notes	£m	£m	£m	£m	£m	£m	£m
Investments in associates and joint ventures	18	4,264	-	-	2	-	-	4,266
Loans	22	-	-	-	400	-	-	400
Derivative financial assets	23	-	4,012	-	-	8	1	4,021
Equity securities and interests in pooled investment funds	41	71,327	-	-	-	-	-	71,327
Debt securities	41	64,085	-	356	-	-	-	64,441
Receivables and other financial assets	24	20	-	-	1,228	-	-	1,248
Cash and cash equivalents	27	-	-	-	10,617	-	-	10,617
Total		139,696	4,012	356	12,247	8	1	156,320

The amount of debt securities expected to be recovered or settled after more than 12 months is £46,814m (2014: £49,896m). Due to the nature of equity securities and interests in pooled investment funds, there is no fixed term associated with these securities.

Estimates and assumptions

Determination of the fair value of private equity investments and those debt securities categorised as level 3 in the fair value hierarchy is a key estimate.  The methods and assumptions used to determine fair value of private equity investments and those debt securities categorised as level 3 in the fair value hierarchy are discussed in Note 43.

22. Loans

Loans are initially measured at fair value and subsequently measured at amortised cost, using the effective interest method, less any impairment losses.

		2015	2014
	Notes	£m	£m
Loans secured by mortgages	43(e)	87	107
Loans and advances to banks with greater than three months to maturity from acquisition date		721	289
Loans secured on policies		3	4
Total loans	41	811	400

Loans with variable rates and fixed interest rates are £67m and £744m respectively (2014: £84m and £316m respectively). Loans that are expected to be recovered after more than 12 months are £138m (2014: £169m).

23.  Derivative financial instruments

A derivative is a financial instrument that is typically used to manage risk and whose value moves in response to an underlying variable such as interest or foreign exchange rates.  The Group uses derivative financial instruments in order to match contractual liabilities, to reduce the risk from potential movements in foreign exchange rates, equity indices, property indices and interest rates, to reduce credit risk or to achieve efficient portfolio management. Certain consolidated investment vehicles also use derivatives to take and alter market exposure, with the objective of enhancing performance and controlling risk.

Management determines the classification of derivatives at initial recognition. All derivative instruments are classified as held for trading except those designated as part of a hedging relationship. Held for trading derivatives are measured at fair value with changes in fair value recognised in the consolidated income statement. 

Using derivatives to manage a particular exposure is referred to as hedging. For a derivative to be considered as part of a hedging relationship its purpose must be formally documented at inception. In addition, the effectiveness of the hedge must be initially high and be able to be reliably measured on a regular basis. Derivatives used to hedge variability in future cash flows such as revenue receivable in a foreign currency are designated as cash flow hedges while derivatives used to hedge currency risk on investments in foreign operations are designated as net investment hedges.

Where a derivative qualifies as a cash flow or net investment hedge, hedge accounting is applied. The effective part of any gain or loss resulting from the change in fair value is recognised in other comprehensive income, and in the cash flow or net investment hedge reserve in equity, while any ineffective part is recognised immediately in the consolidated income statement. If a derivative ceases to meet the relevant hedging criteria, hedge accounting is discontinued.

For cash flow hedges, the amount recognised in the cash flow hedge reserve is transferred to the consolidated income statement (recycled) in the same period or periods during which the hedged item affects profit or loss and is transferred immediately if the cash flow is no longer expected to occur. For net investment hedges, the amount recognised in the net investment hedge reserve is transferred to the consolidated income statement on disposal of the investment.

		2015			2014
		Contract amount	Fair value assets	Fair value liabilities	Contract amount	Fair value assets	Fair value liabilities
	Notes	£m	£m	£m	£m	£m	£m
Cash flow hedges		10	-	-	1,135	1	-
Net investment hedges		5	-	-	1,107	8	12
Held for trading	35	153,277	2,444	1,254	119,963	4,012	1,681
Derivative financial instruments	41	153,292	2,444	1,254	122,205	4,021	1,693

Derivative assets of £2,098m (2014: £2,708m) are expected to be recovered after more than 12 months. Derivative liabilities of £475m (2014: £738m) are expected to be settled after more than 12 months.  

(a)     Cash flow hedges

Forward foreign exchange contracts with an aggregate notional principal amount of £10m (2014: £1,135m) and a net fair value asset position of less than £1m (2014: £1m) were designated as hedges of future cash flows arising from revenue receivable in foreign currency. The cash flows from these instruments are expected to be reported in the consolidated income statement for the following year. In 2015 and 2014, the ineffectiveness recognised in the consolidated income statement that arises from these cash flow hedges was less than £1m.

(b)     Net investment hedges

Forward foreign exchange contracts with a notional principal amount of £5m (2014: £1,107m) and a net liability position of less than £1m (2014: £4m net liability) were designated as net investment hedges and gave rise to losses for the year of £1m (2014: £15m gains), which have been deferred in the net investment hedge translation reserve. The effectiveness of hedges of net investments in foreign operations is measured with reference to changes in the spot exchange rates. Any ineffectiveness, together with any difference in value attributable to forward points, is recognised in the consolidated income statement. In 2015, the losses recognised in the consolidated income statement were less than £1m (2014: £6m). During 2015 £110m was transferred to retained earnings through the consolidated income statement due to the disposal of the Canadian business on 30 January 2015 (2014: £nil).

(c)     Held for trading

Derivative financial instruments classified as held for trading include those that the Group holds as economic hedges of financial instruments that are measured at fair value. Held for trading derivative financial instruments are also held by the Group to match contractual liabilities that are measured at fair value or to achieve efficient portfolio management in respect of instruments measured at fair value.

	2015			2014
	Contract amount	Fair value assets	Fair value liabilities	Contract amount	Fair value assets	Fair value liabilities
	£m	£m	£m	£m	£m	£m
Equity derivatives:
Futures	12,684	18	129	16,420	73	337
Variance swaps	28	25	20	59	53	64
Options	4,752	661	3	8,867	922	187
Total return swaps	3,652	18	50	193	-	2
Bond derivatives:
Futures	8,908	13	52	8,257	88	23
Interest rate derivatives:
Swaps	81,160	748	458	41,244	1,255	692
Futures	63	11	-	-	-	-
Options	-	-	-	68	13	-
Swaptions	7,139	704	5	7,458	851	3
Foreign exchange derivatives:
Forwards	30,860	203	497	32,704	643	293
Futures	-	-	-	-	-	-
Options	1,276	-	11	2,116	42	46
Other derivatives:
Inflation rate swaps	1,108	5	26	2,022	52	30
Credit default swaps	1,647	38	3	555	20	4
Derivative financial instruments held for trading	153,277	2,444	1,254	119,963	4,012	1,681

(d)     Maturity profile

The maturity profile of the contractual undiscounted cash flows in relation to derivative financial instruments is as follows:

	Within 1 year	2-5 years	6-10 years	11-15 years	16-20 years	Greater than 20 years	Total
2015	£m	£m	£m	£m	£m	£m	£m
Cash inflows
Derivative financial assets	9,288	453	469	86	96	503	10,895
Derivative financial liabilities	20,003	10	3	-	-	2	20,018
Total	29,291	463	472	86	96	505	30,913
Cash outflows
Derivative financial assets	(8,831)	(3)	(15)	(32)	(490)	-	(9,371)
Derivative financial liabilities	(20,695)	(107)	(44)	(24)	(33)	(494)	(21,397)
Total	(29,526)	(110)	(59)	(56)	(523)	(494)	(30,768)
Net derivative financial instruments cash (outflows)/inflows	(235)	353	413	30	(427)	11	145

Cash inflows and outflows are presented on a net basis where the Group is required to settle cash flows net.

	Within 1 year	2-5 years	6-10 years	11-15 years	16-20 years	Greater than 20 years	Total
2014	£m	£m	£m	£m	£m	£m	£m
Cash inflows
Derivative financial assets	23,548	812	411	159	113	508	25,551
Derivative financial liabilities	11,802	32	-	-	7	-	11,841
Total	35,350	844	411	159	120	508	37,392
Cash outflows
Derivative financial assets	(22,250)	(42)	(1)	(13)	(595)	-	(22,901)
Derivative financial liabilities	(12,496)	(259)	(123)	(41)	(9)	(487)	(13,415)
Total	(34,746)	(301)	(124)	(54)	(604)	(487)	(36,316)
Net derivative financial instruments cash inflows/(outflows)	604	543	287	105	(484)	21	1,076

Estimates and assumptions

Determination of the fair value of over-the-counter derivative financial instruments is a key estimate.  The methods and assumptions used to determine fair value of over-the-counter derivative financial instruments are discussed in Note 43.

24.  Receivables and other financial assets

		2015	2014
	Notes	£m	£m
Amounts receivable on direct insurance business		83	98
Amounts receivable on reinsurance contracts		1	1
Outstanding sales of investment securities		58	182
Accrued income		224	205
Cancellations of units awaiting settlement		265	256
Collateral pledged in respect of derivative contracts	41	448	202
Property related assets		169	136
Contingent consideration asset	43	15	20
Other		184	148
Receivables and other financial assets		1,447	1,248

The carrying amounts disclosed above reasonably approximate the fair values as at the year end.

The amount of receivables and other financial assets expected to be recovered after more than 12 months is £69m (2014: £56m).

25. Other assets

		2015 £m	2014 £m
Prepayments		36	36
Other		53	80
Other assets		89	116

The amount of other assets expected to be recovered after more than 12 months is £26m (2014: £37m).

Current tax recoverable was previously included within other assets but has now been presented separately on the face of the consolidated statement of financial position. The balance at 31 December 2015 was £168m (2014: £191m). The opening balance at 1 January 2014 was £138m.

26.  Assets and liabilities held for sale

Assets and liabilities held for sale are presented separately in the consolidated statement of financial position and consist of operations and individual non-current assets whose carrying amount will be recovered principally through a sale transaction and not through continuing use.

Operations held for sale, being disposal groups, are measured at the lower of their carrying amount and their fair value less disposal costs. No depreciation or amortisation is charged on assets in a disposal group once it has been classified as held for sale. 

Operations held for sale include certain investment vehicle subsidiaries acquired in the year where it is highly probable that the Group will lose control within 12 months.  For these subsidiaries their assets are measured collectively as the total of the fair value of the subsidiary and the value of its liabilities. Operations held for sale also include newly established investment vehicles which the Group has seeded but is actively seeking to divest from. For these investment funds, which do not have significant liabilities or non-financial assets, financial assets continue to be measured based on the accounting policies that applied before they were classified as held for sale.

Certain amounts seeded into funds are classified as investments in associates at FVTPL. Investment property held for sale relates to property for which contracts have been exchanged but the sale had not completed during the current financial year. Investments in associates at FVTPL and investment property held for sale continue to be measured based on the accounting policies that applied before they were classified as held for sale.

		2015	2014
		£m	£m
Assets of operations held for sale
Canadian business		-	29,254
Investment vehicles		207	63
Investments in associates at FVTPL		33	11
Investment property		87	10
Assets held for sale		327	29,338
Liabilities of operations held for sale		83	28,033

The assets and liabilities of operations held for sale at 31 December 2015 primarily relate to the assets and liabilities of a consolidated infrastructure fund and its subsidiaries. The fund is actively seeking additional external investment and it is highly probable that the Group will no longer have control of this fund within the next 12 months. The assets and liabilities are held in the UK and Europe segment. 

The assets and liabilities of operations held for sale at 31 December 2014 primarily related to the Group's Canadian business which was sold on 30 January 2015 and included the SLAL Canada Branch, the assets and liabilities of which were transferred on 31 December 2015. Refer to Note 1 for further details. The breakdown of these assets and liabilities at 31 December 2014 was as follows:

		Financial instruments					Other
		Designated as   at fair value through profit   or loss	Held for trading	Available-for-sale	Loans and receivables		Other	Total
31 December 2014	Notes	£m	£m	£m	£m		£m	£m
Assets of operations held for sale
Intangible assets		-	-	-	-		13	13
Deferred acquisition costs		-	-	-	-		115	115
Investments in associates and joint ventures		33	-	-	-		70	103
Investment property		-	-	-	-		1,417	1,417
Property, plant and equipment		-	-	-	-		31	31
Deferred tax assets		-	-	-	-		54	54
Reinsurance assets		-	-	-	-		187	187
Loans		-	-	-	2,313		-	2,313
Derivative financial assets		-	44	-	-		-	44
Equity securities and interests in pooled investment funds		12,961	-	-	-		-	12,961
Debt securities		10,694	-	365	-		-	11,059
Receivables and other financial assets		-	-	-	214		-	214
Other assets		-	-	-	-		34	34
Assets held for sale		-	-	-	-		-	-
Cash and cash equivalents	27	-	-	-	709		-	709
Total assets of operations held for sale		23,688	44	365	3,236		1,921	29,254

		Financial instruments					Other
		Designated as   at fair value through profit   or loss	Held for trading	Amortised cost	Insurance contracts		Other	Total
31 December 2014	Notes	£m	£m	£m	£m		£m	£m
Liabilities of operations held for sale
Non-participating insurance contract liabilities	33	-	-	-	9,425		-	9,425
Non-participating investment contract liabilities		13,734	-	2,118	-		-	15,852
Participating contract liabilities	33	-	-	-	702		2	704
Reinsurance liabilities		-	-	-	273		-	273
Deposits received from reinsurers		-	-	-	-		-	-
Third party interest in consolidated funds		953	-	-	-		-	953
Subordinated liabilities	36	-	-	223	-		-	223
Pension and other post-retirement benefit provisions		-	-	-	-		101	101
Deferred income		-	-	-	-		1	1
Deferred tax liabilities		-	-	-	-		13	13
Current tax liabilities		-	-	-	-		3	3
Derivative financial liabilities		-	26	-	-		-	26
Other financial liabilities		-	-	427	-		-	427
Other liabilities		-	-	-	-		32	32
Total liabilities of operations held for sale		14,687	26	2,768	10,400		152	28,033

27. Cash and cash equivalents

Cash and cash equivalents include cash at bank, money at call and short notice with banks, and any highly liquid investments with less than three months to maturity from the date of acquisition, and are measured at amortised cost. For the purposes of the consolidated statement of cash flows, cash and cash equivalents also include bank overdrafts which are included in other financial liabilities on the consolidated statement of financial position.

		2015	2014
		£m	£m
Cash at bank and in hand		824	750
Money at call and short notice		1,840	2,201
Demand, term deposits and debt instruments with less than three months to maturity from acquisition		6,976	7,666
Cash and cash equivalents		9,640	10,617

		2015	2014
	Notes	£m	£m
Cash and cash equivalents		9,640	10,617
Cash and cash equivalents classified as held for sale	26	-	709
Bank overdrafts	39	(49)	(33)
Bank overdrafts classified as held for sale		-	(50)
Total cash and cash equivalents for consolidated statement of cash flows		9,591	11,243

Cash in hand is non-interest bearing. Cash at bank, money at call and short notice and deposits are subject to variable interest rates.

28.  Issued share capital and share premium

Shares are classified as equity instruments when there is no contractual obligation to deliver cash or other assets to another entity on terms that may be unfavourable. The Company's share capital consists of the number of ordinary shares in issue multiplied by their nominal value. The difference between the proceeds received on issue of the shares and the nominal value of the shares issued is recorded in share premium.

(a)     Issued share capital

The movement in the issued ordinary share capital of the Company was:

	2015	2015	2015	2014	2014
Issued shares fully paid	10p each	12 2/9p each	£m	10p each	£m
At 1 January	2,394,373,744	-	239	2,376,616,730	238
Shares issued in respect of share incentive plans	169,283	194,329	-	287,120	-
Shares issued in respect of share options	642,089	10,046,128	2	17,469,894	1
New shares issued immediately prior to share consolidation	6	-	-	-	-
Share consolidation	(2,395,185,122)	1,959,696,918	-	-	-
At 31 December	-	1,969,937,375	241	2,394,373,744	239

On 13 March 2015, the Company undertook a share consolidation of the Company's share capital. Nine new ordinary shares of 12 2/9 pence each were issued for each holding of 11 existing ordinary shares of 10 pence each. As a result, the number of shares in issue reduced from 2,395,185,122 to 1,959,696,918. All ordinary shares in issue in the Company rank pari passu and carry the same voting rights to receive dividends and other distributions declared or paid by the Company.

The Company can issue shares to satisfy awards granted under employee incentive plans which have been approved by shareholders. Details of the Group's employee plans are provided in Note 47.

(b)     Return of value

668,370,013 'B' shares were issued for nil consideration with a nominal value of 73 pence each on 19 March 2015, resulting in a total of £488m being credited to the 'B' share capital account. At the same time £488m was deducted from the share premium account. On 20 March 2015 the 'B' shares were redeemed at 73 pence each. An amount of £488m was deducted from the 'B' share capital account and £488m was transferred from retained earnings to the capital redemption reserve.

1,726,815,109 'C' shares were issued for nil consideration with a nominal value of 0.0000001 pence each on 19 March 2015. An amount of £1.73 was credited to the 'C' share capital account. On 20 March 2015 a dividend of 73 pence per share became payable at a total cost of £1,261m and this amount has been recorded as a deduction from retained earnings. On the same date, the 'C' shares were automatically reclassified as deferred shares. The Company subsequently purchased the deferred shares for an aggregate consideration of one pence.

(c)     Share premium

				2015	2014
				£m	£m
1 January				1,115	1,110
Issue of 'B' shares				(488)	-
Shares issued in respect of share options				1	5
31 December				628	1,115

As noted above, 668,370,013 'B' shares were issued at 73 pence each on 19 March 2015, resulting in a deduction of £488m from the share premium account.

29.  Shares held by trusts

Shares held by trusts relates to shares in Standard Life plc that are held by the Employee Share Trust (EST) and the Unclaimed Asset Trust (UAT).

The EST purchases shares in the Company for delivery to employees under employee incentive plans. Purchased shares are recognised as a deduction from equity at the price paid for them.  Where new shares are issued to the EST the price paid is the nominal value of the shares. When shares are distributed from the trust their corresponding value is released to retained earnings.

In July 2006 Standard Life demutualised and former members of the mutual company were given shares in the new listed Company. Some former members have yet to claim their shares and the UAT holds these on their behalf. The Company has an off-setting obligation to deliver these shares which is also recognised in the shares held by trust reserve. The shares and the off-setting obligation are both measured at £nil.

The number of shares held in trust at 31 December 2015 was as follows:

				2015	2014
Number of shares held in trust
Employee Share Trust				1,637,419	1,081,758
Unclaimed Asset Trust				14,709,934	21,143,650

30.  Retained earnings

The following table shows movements in retained earnings during the year. The movements are aggregated for both continuing and discontinued operations.

		2015	2014
	Notes	£m	£m
At 1 January		1,816	1,391
Recognised in comprehensive income
Recognised in profit for the year attributable to equity holders		1,423	503
Recognised in other comprehensive income
Remeasurement gains on defined benefit pension plans		148	272
Share of other comprehensive income of joint ventures		2	4
Aggregate tax items recognised in other comprehensive income		5	5
Total items recognised in comprehensive income		1,578	784
Recognised directly in equity
Dividends paid on ordinary shares		(343)	(386)
Redemption of 'B' shares	28	(488)	-
Dividends paid on 'C' shares	28	(1,261)	-
Dividends due on unclaimed shares not held in the Unclaimed Asset Trust		(2)	-
Transfer from equity compensation reserve for vested employee share-based payments	31	32	27
Transfer from revaluation of owner occupied property reserve on sale of owner occupied property		-	4
Transfer from other reserves on disposal of a subsidiary	1	827	-
Shares distributed by employee and other trusts		(2)	(10)
Aggregate tax items recognised in equity		5	6
Total items recognised directly in equity		(1,232)	(359)
At 31 December		2,162	1,816

 

END

 

 

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