229 ANNUAL REPORT 2010 ❏ NOTES TO THE FINANCIAL STATEMENTS OF AEGON N.V.  AMOUNTS IN EUR MILLION, UNLESS OTHERWISE STATED NOTE 1  GENERAL INFORMATION NOTE 2.3 OFFSETTING OF ASSETS AND LIABILITIES NOTE 2.4 INVESTMENTS NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING  POLICIES NOTE 2.1 BASIS OF PREPARATION NOTE 2.2 FOREIGN EXCHANGE TRANSLATION SHARPENING OUR FOCUS Exchange differences on monetary items are recognized in  the income statement when they arise, except when they are  deferred in equity as a result of a qualifying cash flow or net  At the balance sheet date monetary assets, monetary liabilities  and own equity instruments in foreign currencies are translated  at the prevailing exchange rate. Non-monetary items carried at  cost are translated using the exchange rate at the date of the  transaction, whilst assets carried at fair value are translated at  the exchange rate when the fair value was determined.  Transactions in foreign currencies are translated to the functional  currency using the exchange rates prevailing at the date of the  transaction.  The fair value of an asset is the amount for which it could be  exchanged between knowledgeable, willing parties in an arm’s  length transaction. For quoted financial assets for which there  is an active market, the fair value is the bid price at the balance  sheet date. In the absence of an active market, fair value is  estimated by using present value based or other valuation  techniques. Where discounting techniques are applied, the  discount rate is based on current market rates applicable to  financial instruments with similar characteristics. The valuation  techniques that include non-market observable inputs can  result in a different outcome than the actual transaction price  at which the asset was acquired. Such differences are not  recognized in the income statement immediately but are  deferred. They are released over time to the income statement  in line with the change in factors (including time) that market  participants would consider in setting a price for the asset.  Interest accrued to date is not included in the fair value of  the financial asset. With regard to the income statement of AEGON N.V., article  402, Part 9 of Book 2 of the Netherlands Civil Code has been  applied, allowing a simplified format. Available-for-sale assets are recorded at fair value with  unrealized changes in fair value recognized in other  comprehensive income.  The financial statements have been prepared in accordance  with accounting principles in the Netherlands as embodied in  Part 9 of Book 2 of the Netherlands Civil Code. Based on article  2:362.8 of the Netherlands Civil Code, the valuation principles  applied are based on International Financial Reporting  Standards (IFRS), as used for the preparation of the  consolidated financial statements of the Group. Other investments are financial assets recognized on the trade  date when the Group becomes a party to the contractual  provisions of the instrument and are classified for accounting  purposes depending on the characteristics of the instruments  and the purpose for which they were purchased. They are  initially recognized at fair value excluding interest accrued  to date plus, in the case of a financial asset not at fair value  through profit or loss, any directly attributable incremental  transaction costs. The group companies are stated at their net asset value,  determined on the basis of IFRS as applied in the consolidated  financial statements of the Group. For details on the accounting  policies applied for the group companies refer to the  consolidated financial statements on page 80 and following. AEGON N.V. (or ‘the Company’), its subsidiaries and its  proportionally consolidated joint ventures (AEGON or ‘the  Group’) have life insurance and pensions operations in over  twenty countries in Europe, the Americas and Asia and are  also active in savings and investment operations, accident  and health insurance, general insurance and limited banking  operations. Headquarters are located in The Hague,  the Netherlands. The Group employs approximately  27,500 people worldwide.  Financial assets and liabilities are offset in the balance sheet  when AEGON N.V. has a legally enforceable right to offset and  has the intention to settle the asset and liability on a net basis  or simultaneously.  AEGON N.V., incorporated and domiciled in the Netherlands, is  a public limited liability share company organized under Dutch  law and recorded in the Commercial Register of The Hague  under its registered address at AEGONplein 50, 2591 TV  The Hague. AEGON N.V. serves as the holding company for  the AEGON Group and has listings of its common shares in  Amsterdam, New York and London.  investment hedge. Exchange differences on non-monetary items  are recognized in equity or the income statement accordingly  consistently with other gains and losses on these items.