D _ Consolidated Financial Statements case for puttable instruments issued by mutual funds controlled but Interest and similar income and interest expenses not wholly owned by the Allianz Group. Interest income and interest expenses are recognized on an accrual basis using the effective interest method. This line item also includes Lease liabilities dividends from available-for-sale equity securities as well as income The Allianz Group has elected not to recognize right-of-use assets and from investments in associates and joint ventures. Dividends are lease liabilities for short-term leases and leases of low-value assets. recognized in income when the right to receive the dividend is Furthermore, the Allianz Group does not recognize right-of-use assets established. and lease liabilities for car leases. The expenses relating to the short- term leases and leases of low-value assets including car leases are Income from financial assets and liabilities carried expensed on a straight-line basis over the lease term. at fair value through income (net) For further information on these expenses, please refer to note 3 8. Income from financial assets and liabilities carried at fair value through income (net) includes all investment income as well as rea- Certificated liabilities and subordinated liabilities lized and unrealized gains and losses from financial assets and Certificated liabilities and subordinated liabilities are subsequently liabilities carried at fair value through income. In addition, commissions measured at amortized cost, using the effective interest method to attributable to trading operations and related interest expenses as amortize the premium or discount to the redemption value over the life well as refinancing and transaction costs are included in this line item. of the liability. Foreign currency gains and losses on monetary items are also reported within income from financial assets and liabilities carried at fair value Equity through income (net). Issued capital represents the mathematical per-share value received at the issuance of shares. Additional paid-in capital represents the Fee and commission income premium exceeding the issued capital received at the issuance of Fee and commission income primarily consists of asset management shares. fees which are recognized when the service is provided. For those fees, Retained earnings comprise the net income of the current year the service is considered to be provided periodically. Performance fees and of prior years not yet distributed, treasury shares, amounts may not be recognized as fee income before the respective recognized in other comprehensive income, and any amounts directly benchmark period is completed. Before its completion, the obligation recognized in equity according to IFRS. to pay the fee is conditional, the fund performance is regularly not Please refer to the section above for an explanation of foreign reliably estimable, and the related service is not fully performed. In any currency changes that are recognized in equity. The effective portion case, performance-related fees from alternative investment products of gains and losses of hedging instruments designated as hedges of a (carried interest) are not recognized as revenue prior to the date of the net investment in a foreign operation is recognized in foreign currency official declaration of distribution by the fund. The transaction price for translation adjustments. asset management services is determined by the fees contractually Unrealized gains and losses (net) include unrealized gains and agreed. losses from available-for-sale investments and from derivative financial instruments that meet the criteria for cash flow hedge Lease income accounting. Lease income from operating leases (excluding receipts for services Undated subordinated debt comprises Restricted Tier 1 notes provided such as insurance and maintenance which are recognized that do not qualify as financial liabilities under IFRS. The instruments directly as income) is recognized on a straight line basis over the lease are classified as shareholders’ equity and any related interest charges term even if the receipts are not on such a basis, for example upfront are classified as distributions from shareholders’ equity. The notes are payments. measured at their historical value or their closing value as regards exchange rates. The corresponding foreign exchange differences are Claims and insurance benefits incurred recognized as foreign currency translation adjustments in equity. These expenses consist of claims and insurance benefits incurred Non-controlling interests represent equity in subsidiaries, not during the period, including benefit claims in excess of policy account attributable directly or indirectly, to Allianz SE as parent. balances and interest credited to policy account balances. Furthermore, it includes claims handling costs directly related to the Premiums processing and settlement of claims. Reinsurance recoveries are Premiums for short-duration insurance contracts are recognized as deducted from claims and insurance benefits. revenues over the period of the contract in proportion to the amount of insurance protection provided. Premiums for long-duration Income taxes insurance contracts are recognized as earned when due. Current income taxes are calculated based on the respective local Revenues for universal life-type and investment contracts taxable income and local tax rules for the period. In addition, current represent charges assessed against the policyholders’ account income taxes presented for the period include adjustments for balances for front-end loads, net of the change in unearned revenue uncertain tax payments or tax refunds for periods not yet finally liabilities and cost of insurance, surrenders, and policy administration, assessed, excluding interest expenses and penalties on the and are included within premiums earned (net). underpayment of taxes. In the event that amounts included in the tax Premiums ceded for reinsurance are deducted from premiums return are considered unlikely to be accepted by the tax authorities written. (uncertain tax positions), a provision for income taxes is recognized. The Annual Report 2021 − Allianz Group 131