AIG 2011 Annual Report Download - page 238

American International Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2011, the fair value of collateral posted by AIG for repurchase agreements totaled
$2.8 billion, of which $2.7 billion could be repledged or resold by the counterparties. The market value of
securities to be repurchased is monitored, and additional collateral is posted where appropriate.
Also included in Other liabilities are obligations under gold leases, which are accounted for as a debt host with
an embedded gold derivative which are accounted for under the fair value option.
(q) Other long-term debt: AIG’s funding consists, in part, of medium and long-term debt. Long-term debt is
carried at the principal amount borrowed, net of unamortized discounts or premiums. See Note 15 herein for
additional information. Long-term debt also includes liabilities connected to trust preferred stock principally
related to outstanding securities issued by SunAmerica Financial Group, Inc. (SAFG, Inc.), a wholly owned
subsidiary of AIG (formerly AIG Life Holdings, Inc.). Cash distributions on such preferred stock are accounted
for as interest expense.
(r) Contingent liabilities: Amounts are accrued for the resolution of claims that have either been asserted or
are deemed probable of assertion if, in the opinion of management, it is both probable that a liability has been
incurred and the amount of the liability can be reasonably estimated. In many cases, it is not possible to
determine whether a liability has been incurred or to estimate the ultimate or minimum amount of that liability
until years after the contingency arises, in which case, no accrual is made until that time. See Note 16 herein for
additional information.
(s) Foreign currency: Financial statement accounts expressed in foreign currencies are translated into U.S.
dollars. Functional currency assets and liabilities are translated into U.S. dollars generally using rates of exchange
prevailing at the balance sheet date of each respective subsidiary and the related translation adjustments are
recorded as a separate component of Accumulated other comprehensive income (loss), net of any related taxes, in
Total AIG shareholders’ equity. Functional currencies are generally the currencies of the local operating
environment. Financial statement accounts expressed in currencies other than the functional currency of a
consolidated entity are translated into that entity’s functional currency. Income statement accounts expressed in
functional currencies are translated using average exchange rates during the period. The adjustments resulting
from translation of financial statements of foreign entities operating in highly inflationary economies are recorded
in income. Exchange gains and losses resulting from foreign currency transactions are recorded in income.
(t) Noncontrolling interests:
Nonvoting, callable, junior preferred interests held by Department of the Treasury and Nonvoting, callable, junior and
senior preferred interests held by the FRBNY: Represent preferred interests in (i) at December 31, 2011, a wholly-
owned SPV initially formed to hold the common stock of AIA and (ii) at December 31, 2010, two wholly-owned
SPVs initially formed to hold common stock of AIA and ALICO at December 31, 2010. The preferred interests
were measured at fair value on their issuance date. AIG transferred the preferred interests in the SPVs to the
FRBNY in consideration for a $25 billion reduction of the FRBNY Credit Facility. The preferred interests initially
had a liquidation preference of $25 billion and had a preferred return of five percent per year compounded
quarterly through September 22, 2013 and nine percent thereafter. The preferred return is reflected in Income
(loss) from continuing operations attributable to noncontrolling interests — Nonvoting, callable, junior and senior
preferred interests in the Consolidated Statement of Operations. The difference between the preferred interests’
fair value and the initial liquidation preference is being amortized and included in Net income (loss) from
continuing operations attributable to noncontrolling interests — Nonvoting, callable, junior and senior preferred
interests. These noncontrolling interests, other than the senior preferred interests in the ALICO SPV, which were
redeemed in full, were transferred to the Department of the Treasury as part of the January 14, 2011
Recapitalization transactions.
224 AIG 2011 Form 10-K