247 ANNUAL REPORT 2010 ❏ GLOSSARY  SHARPENING OUR FOCUS Acquisition date  is the date on which the acquirer effectively  obtains control of the acquiree. In most cases this includes at  least the transfer of risks and rewards related to the acquired  business or assets / liabilities. Actuarial funding  enables a life insurance company to reduce  the size of the unit reserves it holds for unit linked business to  reflect some or all of the unit-linked charges it expects to receive  in the future from the units nominally allocated. Actuarial funding  is used on those contracts that have surrender penalties and the  company will hold a minimum of the surrender value at all times. Actuarial gains and losses  relate to the accounting for post- employment benefit plans. They comprise the effects of  experience adjustments and changes in assumptions used  to determine the cost of a plan. Amortized cost  is the amount at which the financial asset  or liability is measured at initial recognition minus principal  repayments, plus or minus the cumulative amortization using  the effective interest rate method of any difference between  that initial amount and the maturity amount and minus any  reduction (directly or through the use of an allowance account)  for impairment or uncollectability. Assets held by long-term employee benefit funds  are part  of plan assets. These are assets (other than non-transferable  financial instruments issued by the reporting entity) that: Bifurcation  is the measurement and presentation of embedded  derivatives separate from the host contracts, as if they were  stand-alone derivative financial instruments. Binomial option pricing model  uses a binomial lattice that  represents possible paths that might be followed by the  underlying asset’s price over the life of the option, for a given  number of time steps between valuation date and option  expiration. Each node in the lattice represents a possible  price of the underlying asset, at a particular point in time.  The valuation process is iterative; it starts at each final node  and then works backwards through the lattice to the first node,  which is the valuation date, where the calculated result is the  value of the option. ■ Are held by an entity that is legally separate from the  reporting entity and exists solely to pay or fund employee  benefi ts; and ■ Are available to be used only to pay or fund employee  benefits and are not available to the reporting entity’s own  creditors. Deferred tax assets  are amounts of income taxes recoverable  in future periods in respect of deductible temporary differences;  the carryforward of unused tax losses; and the carryforward of  unused tax credits. Currency risk  is a market risk, namely the risk that the value  of a financial instrument will fluctuate due to changes in foreign  exchange rates. Credit risk  is the risk that one party to a financial instrument  will fail to discharge an obligation and cause the other party  to incur a financial loss. Constructive obligation  is an obligation that derives from an  entity’s actions whereby an established pattern of past practice,  published policies or a sufficiently specific current statement,  the entity has indicated to other parties that it will accept  certain responsibilities, and as a result, the entity has created  a valid expectation on the part of those other parties that it will  discharge those responsibilities. Compound financial instruments  are financial instruments  that, from the issuer’s perspective, contain both a liability and  an equity element. Collateral  is an asset pledged by a borrower to secure a loan  and is subject to seizure in the case of default. Claims settlement expenses  are costs incurred in settling a  claim. These costs include internal administration and payout  costs, but also such items as attorney’s fees and investigation  expenses. Cedant  is the policyholder under a reinsurance contract. Cash generating unit  is the smallest identifiable group of  assets that generates cash inflows that are largely independent  of the cash inflows from other assets or groups of assets. Capitalization  is the recognition of a cost as part of the cost  of an asset on the balance sheet. Business combination  is the bringing together of separate  entities or operations of entities into one reporting entity. This  can be realized through a purchase transaction or by means of a  merger. A business combination involving entities (or operations  of entities) under common control is a business combination in  which all of the combining entities (or operations of entities)  ultimately are controlled by the same party or parties both  before and after the combination, and that control is not  transitory.