AIG 2011 Annual Report Download - page 241

American International Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accounting Standards Adopted During 2011
Fair Value Measurements and Disclosures
In January 2010, the FASB issued an accounting standard that requires fair value disclosures about significant
transfers between Level 1 and 2 measurement categories and separate presentation of purchases, sales, issuances,
and settlements within the rollforward of Level 3 activity. Also, this fair value guidance clarifies the disclosure
requirements about the level of disaggregation and valuation techniques and inputs. This guidance became
effective for AIG beginning on January 1, 2010, except for the disclosures about purchases, sales, issuances, and
settlements within the rollforward of Level 3 activity, which became effective for AIG beginning on January 1,
2011. See Note 6 herein.
Consolidation of Investments in Separate Accounts
In April 2010, the FASB issued an accounting standard that clarifies that an insurance company should not
combine any investments held in separate account interests with its interest in the same investment held in its
general account when assessing the investment for consolidation. Separate accounts represent funds for which
investment income and investment gains and losses accrue directly to the policyholders who bear the investment
risk. The standard also provides guidance on how an insurer should consolidate an investment fund when the
insurer concludes that consolidation of an investment is required and the insurer’s interest is through its general
account in addition to any separate accounts. The standard became effective for AIG on January 1, 2011. The
adoption of this standard did not have a material effect on AIG’s consolidated financial condition, results of
operations or cash flows.
A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring
In April 2011, the FASB issued an accounting standard that amends the guidance for a creditor’s evaluation of
whether a restructuring is a troubled debt restructuring and requires additional disclosures about a creditor’s
troubled debt restructuring activities. The standard clarifies the existing guidance on the two criteria used by
creditors to determine whether a modification or restructuring is a troubled debt restructuring: (i) whether the
creditor has granted a concession and (ii) whether the debtor is experiencing financial difficulties. The standard
became effective for AIG for interim and annual periods beginning on July 1, 2011. AIG applied the guidance in
the accounting standard retrospectively for all modifications and restructuring activities that had occurred since
January 1, 2011. For receivables that were considered impaired under the guidance, AIG was required to measure
the impairment of those receivables prospectively in the first period of adoption. In addition, AIG must provide
the disclosures about troubled debt restructuring activities in the period of adoption. The adoption of this
standard did not have a material effect on AIG’s consolidated financial condition, results of operations or cash
flows. See Note 8 herein.
Testing Goodwill for Impairment
In September 2011, the FASB issued an accounting standard that amends the approach to testing goodwill for
impairment. The standard simplifies how entities test goodwill for impairment by permitting an entity to first
assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is
less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative,
two-step goodwill impairment test. The standard is effective for annual and interim goodwill impairment tests
performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. AIG plans to adopt
the standard in conjunction with its goodwill impairment testing performed in 2012. The adoption of the standard
is not expected to affect AIG’s consolidated financial condition, results of operations or cash flows.
AIG 2011 Form 10-K 227