Humana 2015 Annual Report Download - page 109

Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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exist and are generally classified as Level 3. For privately-held debt securities, such methodologies include reviewing
the value ascribed to the most recent financing, comparing the security with securities of publicly-traded companies
in similar lines of business, and reviewing the underlying financial performance including estimating discounted cash
flows. Auction rate securities are debt instruments with interest rates that reset through periodic short-term auctions.
From time to time, liquidity issues in the credit markets have led to failed auctions. Given the liquidity issues, fair value
could not be estimated based on observable market prices, and as such, unobservable inputs were used. For auction
rate securities, valuation methodologies include consideration of the quality of the sector and issuer, underlying
collateral, underlying final maturity dates, and liquidity.
Recently Issued Accounting Pronouncements
In January 2016, the Financial Accounting Standards Board, or FASB, issued new guidance related to classification
and measurement of financial instruments which requires equity securities that are not accounted for using the equity
method or that do not result in consolidation, to be accounted for at fair value with changes in fair value recognized
through net income. The new guidance is effective for us beginning with annual and interim periods in 2018 with early
adoption permitted under certain circumstances. We are currently evaluating the impact, if any, on our results of
operations, financial position, and cash flows.
In November 2015, the FASB issued new guidance related to accounting for income taxes which changes the
balance sheet classification of deferred taxes, requiring deferred tax liabilities and assets be classified as noncurrent in
a classified statement of financial position. The new guidance is effective for us beginning with annual and interim
periods in 2017, with early adoption permitted. We elected to early adopt the guidance and have classified all deferred
tax liabilities and assets as noncurrent in our consolidated balance sheet at December 31, 2015 to simplify their
presentation. Prior periods were not retrospectively adjusted. The adoption of the new guidance did not have any impact
on our results of operations or cash flows.
In May 2015, the FASB issued new guidance requiring insurance entities to provide additional disclosures about
claim liabilities including paid claims development information by accident year and claim frequency data and related
methodologies. The guidance is effective for us beginning with the 2016 annual reporting period and interim periods
beginning in 2017. We are currently evaluating the impact the new guidance will have on our disclosures.
In April 2015, the FASB issued new guidance to help entities determine whether a cloud computing arrangement
contains a software license that should be accounted for as internal-use software or as a service contract. The guidance
is effective for us beginning with interim and annual reporting periods in 2016, with early adoption permitted. Upon
adoption, an entity has the option to apply the provisions either prospectively to all arrangements entered into or
materially modified, or retrospectively. We are currently evaluating the impact, if any, on our results of operations,
financial position, and cash flows.
In March 2015, the FASB issued new guidance which changes the presentation of debt issuance costs from an
asset to a direct reduction of the related debt liability. The new guidance is effective for us beginning with annual and
interim periods in 2016 with early adoption permitted. The adoption of the new guidance will not have a material impact
on our results of operations, financial condition, or cash flows.
In February 2015, the FASB issued an amendment to current consolidation guidance that modifies the evaluation
of whether limited partnerships and similar legal entities are variable interest entities or voting interest entities,
eliminating the presumption that a general partner should consolidate a limited partnership, and affects the consolidation
analysis of reporting entities that are involved with variable interest entities. The new guidance is effective for us
beginning with interim and annual reporting periods in 2016, with early adoption permitted. All legal entities are subject
to reevaluation under the revised consolidation model. We are currently evaluating the impact, if any, on our results of
operations, financial position, and cash flows.
In May 2014, the FASB issued new guidance that amends the accounting for revenue recognition. The amendments
are intended to provide a more robust framework for addressing revenue issues, improve comparability of revenue
recognition practices, and improve disclosure requirements. Insurance contracts are not included in the scope of this
new guidance. In July 2015, the FASB decided to defer the effective date provided in the new revenue guidance by