104 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AEGON N.V.  NOTE 2.20 - 2.22 NOTE 2.20 INVESTMENT CONTRACTS A. INVESTMENT CONTRACTS WITH DISCRETIONARY  PARTICIPATION FEATURES Contracts issued by the Group that do not transfer significant  insurance risk, but do transfer financial risk from the  policyholder to the Group are accounted for as investment  contracts. Depending on whether the Group or the policyholder  runs the risks associated with the investments allocated to the  contract, the liabilities are classified as investment contracts or  as investment contracts for account of policyholders.  Investment contract liabilities are recognized when the contract  is entered into and are derecognized when the contract expires,  is discharged or is cancelled. Subsequently, contracts designated as at fair value through  profit or loss are measured at fair value, which generally equals  the contractholder’s account value. All changes in the fair value  are recognized in the income statement as incurred. Other  investment contracts without discretionary participation  features are carried at amortized cost based on the expected  cash flows and using the effective interest rate method. The  expected future cash flows are re-estimated at each reporting  date and the carrying amount of the financial liability is  recalculated as the present value of estimated future cash flows  using the financial liability’s original effective interest rate. Any  adjustment is immediately recognized in the income statement. The consolidated financial statements provide information on  the fair value of all financial liabilities, including those carried  at amortized cost. As these contracts are not quoted in active  markets, their value is determined by using valuation  techniques, such as discounted cash flow methods and  stochastic modeling. For investment contracts that can be  cancelled by the policyholder, the fair value cannot be less  than the surrender value. Some investment contracts have participation features whereby  the policyholder has the right to receive potentially significant  additional benefits which are based on the performance of a  specified pool of investment contracts, specific investments  held by the Group or on the issuer’s net income. If the Group  has discretion over the amount or timing of the distribution  of the returns to policyholders, the investment contract liability  is measured based on the accounting principles that apply to  insurance contracts with similar features. Some unitized investment contracts provide policyholders  with the option to switch between funds with and without  discretionary participation features. The entire contract is  accounted for as an investment contract with discretionary  participation features if there is evidence of actual switching  resulting in discretionary participation benefits that are a  significant part of the total contractual benefits. Investment contracts for account of policyholders are  investment contracts for which the actual return on  investments allocated to the contract is passed on to the  policyholder. Also included are participations held by third  parties in consolidated investment funds that meet the  definition of a financial liability. Investment contracts for account of policyholders are  designated as at fair value through profit or loss. Contracts with  unit-denominated payments are measured at current unit  values, which reflect the fair values of the assets of the fund.  At inception investment contracts without discretionary  features are designated as at fair value through profit or loss  if by doing so a potential accounting mismatch is eliminated  or significantly reduced or if the contract is managed on a  fair value basis. Some investment contracts with embedded  derivatives that have not been bifurcated are also carried at  fair value through profit or loss. All other contracts are carried  at amortized cost. For unit-linked contracts without discretionary participation  features and subject to actuarial funding, the Group recognizes  a liability at the funded amount of the units. The difference  between the gross value of the units and the funded value is  treated as an initial fee paid by the policyholder for future asset  management services and is deferred. It is subsequently  amortized over the life of the contract or a shorter period,  if appropriate. A provision is recognized for present legal or constructive  obligations arising from past events, when it is probable that  it will result in an outflow of economic benefits and the amount  can be reliably estimated. The contracts are initially recognized at transaction price less,  in the case of investment contracts not carried at fair value  through profit or loss, any transaction costs directly  attributable to the issue of the contract. Fees and commissions  incurred with the recognition of a contract held at fair value  through profit or loss and that are not related to investment  management services provided under the contract are  recognized immediately in the income statement. NOTE 2.21 PROVISIONS B. INVESTMENT CONTRACTS WITHOUT DISCRETIONARY  PARTICIPATION FEATURES C. INVESTMENT CONTRACTS FOR ACCOUNT OF  POLICYHOLDERS