AIG 2013 Annual Report Download - page 196

Critical Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP requires the application of accounting policies
that often involve a significant degree of judgment.
The accounting policies that we believe are most dependent on the application of estimates
and assumptions, which are critical accounting estimates, are related to the determination
of:
• classification of ILFC as held for sale and related fair value measurement;
• income tax assets and liabilities, including recoverability of our net deferred tax asset and the predictability of
future tax operating profitability of the character necessary to realize the net deferred tax asset;
• liability for unpaid claims and claims adjustment expense;
• reinsurance assets;
• valuation of future policy benefit liabilities and timing and extent of loss recognition;
• valuation of liabilities for guaranteed benefit features of variable annuity products:
• estimated gross profits to value deferred acquisition costs for investment-oriented products;
• impairment charges, including other-than-temporary impairments on available for sale securities, impairments
on investments in life settlements and goodwill impairment;
• liability for legal contingencies; and
• fair value measurements of certain financial assets and liabilities.
These accounting estimates require the use of assumptions about matters, some of which are highly uncertain at the
time of estimation. To the extent actual experience differs from the assumptions used, our consolidated financial
condition, results of operations and cash flows could be materially affected.
The major assumptions used to establish each critical accounting estimate are discussed below.
We report a business as held for sale when management has approved or received approval to sell the business
and is committed to a formal plan, the business is available for immediate sale, the business is being actively
marketed, the sale is anticipated to occur during the next 12 months, which may require significant judgment, and
certain other specified criteria are met. A business classified as held for sale is recorded at the lower of its carrying
amount or estimated fair value less cost to sell. If the carrying amount of the business exceeds its estimated fair
value, a loss is recognized.
On December 9, 2012, AIG Parent, AIG Capital Corporation (Seller), a wholly-owned direct subsidiary of AIG Parent
and the sole shareholder of ILFC, and Jumbo Acquisition Limited (Jumbo) entered into a definitive agreement (the
Jumbo Share Purchase Agreement) for the sale of 80.1 percent of the common stock of ILFC for approximately
$4.2 billion in cash (the ILFC Transaction). Jumbo was granted an option to purchase an additional 9.9 percent of
the common stock of ILFC for $522.5 million (the Option). We determined ILFC met the criteria for held for sale and
discontinued operations accounting at December 31, 2012 and, consequently, we recorded a $4.4 billion after-tax
loss for the year ended December 31, 2012. As of December 15, 2013, the closing of the ILFC Transaction had not
occurred and on December 16, 2013, AIG Parent and Seller terminated the amended Jumbo Share Purchase
Agreement.
On December 16, 2013, AIG Parent and Seller entered into a definitive agreement with AerCap Holdings N.V.
(AerCap) and AerCap Ireland Limited for the sale of 100 percent of the common stock of ILFC (the AerCap
Agreement) for consideration consisting of $3.0 billion of cash and approximately 97.6 million newly issued AerCap
Classification of ILFC as Held for Sale and Related Fair Value Measurement
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AIG 2013 Form 10-K178
ITEM 7 / CRITICAL ACCOUNTING ESTIMATES
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