Citibank 2009 Annual Report Download - page 145

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ACCOUNTING CHANGES
FASB Launches Accounting Standards Codification
The FASB has issued FASB Statement No. 168, The FASB Accounting
Standards Codification™ and the Hierarchy of Generally Accepted
Accounting Principles (now ASC 105, Generally Accepted Accounting
Principles). The statement establishes the FASB Accounting Standards
Codification™ (Codification or ASC) as the single source of authoritative
U.S. generally accepted accounting principles (GAAP) recognized by the FASB
to be applied by nongovernmental entities. Rules and interpretive releases of
the Securities and Exchange Commission (SEC) under authority of federal
securities laws are also sources of authoritative GAAP for SEC registrants.
The Codification supersedes all existing non-SEC accounting and reporting
standards. All other nongrandfathered, non-SEC accounting literature not
included in the Codification has become nonauthoritative.
Following the Codification, the Board will not issue new standards in
the form of Statements, FASB Staff Positions or Emerging Issues Task Force
Abstracts. Instead, it will issue Accounting Standards Updates (ASU), which
will serve to update the Codification, provide background information
about the guidance and provide the basis for conclusions on the changes
to the Codification.
GAAP is not intended to be changed as a result of the FASB’s Codification
project, but what does change is the way the guidance is organized and
presented. As a result, these changes have a significant impact on how
companies reference GAAP in their financial statements and in their
accounting policies for financial statements issued for interim and annual
periods ending after September 15, 2009.
Citigroup is providing references to the Codification topics alongside
references to the predecessor standards.
Investments in Certain Entities that Calculate Net
Asset Value per Share
As of December 31, 2009, the Company adopted Accounting Standards Update
(ASU) No. 2009-12, Investments in Certain Entities that Calculate Net Asset
Value per Share (or its Equivalent), which provides guidance on measuring
the fair value of certain alternative investments. The ASU permits entities to
use net asset value as a practical expedient to measure the fair value of their
investments in certain investment funds. The ASU also requires additional
disclosures regarding the nature and risks of such investments and provides
guidance on the classification of such investments as Level 2 or Level 3 of
the fair value hierarchy. This ASU did not have a material impact on the
Company’s accounting for its investments in alternative investment funds.
Interim Disclosures about Fair Value of Financial
Instruments
In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, Interim
Disclosures about Fair Value of Financial Instruments, (now ASC 825-
10-50-10, Financial Instruments: Fair Value of Financial Instruments).
This FSP requires disclosing qualitative and quantitative information about
the fair value of all financial instruments on a quarterly basis, including
methods and significant assumptions used to estimate fair value during the
period. These disclosures were previously only done annually.
The disclosures required by this FSP were effective for the quarter ended
June 30, 2009. This FSP has no effect on how Citigroup accounts for these
instruments.
Measurement of Fair Value in Inactive Markets
In April 2009, the FASB issued FSP FAS 157-4, Determining Fair Value
When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not
Orderly (now ASC 820-10-35-51A, Fair Value Measurements and
Disclosures: Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased). The FSP
reaffirms that fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market
participants at the measurement date under current market conditions.
The FSP also reaffirms the need to use judgment in determining whether a
formerly active market has become inactive and in determining fair values
when the market has become inactive. The adoption of the FSP had no effect
on the Company’s Consolidated Financial Statements.
Determining Fair Value in Inactive Markets
In October 2008, the FASB issued FSP FAS 157-3, Determining Fair Value
of Financial Assets When the Market for That Asset is Not Active (now ASC
820-10-35-55A, Fair Value Measurements and Disclosures: Financial
Assets in a Market That is Not Active). The FSP clarifies that companies
can use internal assumptions to determine the fair value of a financial
asset when markets are inactive, and do not necessarily have to rely on
broker quotes. The FSP confirms a joint statement by the FASB and the SEC
in which they stated that companies can use internal assumptions when
relevant market information does not exist and provides an example of how
to determine the fair value for a financial asset in a non-active market. The
FASB emphasized that the FSP is not new guidance, but rather clarifies the
principles in ASC 820, Fair Value Measurements and Disclosures (formerly
SFAS 157).
Revisions resulting from a change in the valuation technique or its
application should be accounted for prospectively as a change in accounting
estimate.
The FSP was effective upon issuance and did not have a material impact.