MetLife 2007 Annual Report Download - page 114

The Subsidiaries also sponsor defined contribution savings and investment plans (“SIP”) for substantially all employees under which a
portion of employee contributions are matched. Applicable matching contributions are made each payroll period. Accordingly, the
Company recognizes compensation cost for current matching contributions. As all contributions are transferred currently as earned to
the SIP trust, no liability for matching contributions is recognized in the consolidated balance sheets.
Stock-Based Compensation
Stock-based compensation grants prior to January 1, 2003 were accounted for using the intrinsic value method prescribed by
Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), and related interpretations.
Compensation expense, if any, was recorded based upon the excess of the quoted market price at grant date over the amount the
employee was required to pay to acquire the stock. Under the provisions of APB 25, there was no compensation expense resulting from
the issuance of stock options as the exercise price was equivalent to thefairmarketvalueatthedateofgrant.Compensationexpensewas
recognized under the Long-Term Performance Compensation Plan (“LTPCP”), as described more fully in Note 18.
Stock-based awards granted after December 31, 2002 but prior to January 1, 2006 were accounted for on a prospective basis using
the fair value accounting method prescribed by SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS 123”), as amended by
SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure (“SFAS 148”). The fair value method of SFAS 123
required compensation expense to be measured based on the fair value of the equity instrument at the grant or award date. Stock-based
compensation was accrued over the vesting period of the grant or award, including grants or awards to retirement-eligible employees. As
required by SFAS 148, the Company discloses the pro forma impact as if the stock options granted prior to January 1, 2003 had been
accounted for using the fair value provisions of SFAS 123 rather than the intrinsic value method prescribed by APB 25. See Note 18.
Effective January 1, 2006, the Company adopted, using the modified prospective transition method, SFAS No. 123 (revised 2004),
Share-Based Payment (“SFAS 123(r)”), which replaces SFAS 123 and supersedes APB 25. The adoption of SFAS 123(r) did not have a
significant impact on the Company’s financial position or results of operations. SFAS 123(r) requires that the cost of all stock-based
transactions be measured at fair value and recognized over the period during which a grantee is required to provide goods or services in
exchange for the award. Although the terms of the Company’s stock-based plans do not accelerate vesting upon retirement, or the
attainment of retirement eligibility, the requisite service period subsequent to attaining such eligibility is considered nonsubstantive.
Accordingly, the Company recognizes compensation expense related to stock-based awards over the shorter of the requisite service
period or the period to attainment of retirement eligibility. SFAS 123(r) also requires an estimation of future forfeitures of stock-based
awards to be incorporated into the determination of compensation expense when recognizing expense over the requisite service period.
Foreign Currency
Balance sheet accounts of foreign operations are translated at the exchange rates in effect at each year-end and income and expense
accounts are translated at the average rates of exchange prevailing during the year. The local currencies of foreign operations generally are
the functional currencies unless the local economy is highly inflationary. Translation adjustments are charged or credited directly to other
comprehensive income or loss. Gains and losses from foreign currency transactions are reported as net investment gains (losses) in the
period in which they occur.
Discontinued Operations
The results of operations of a component of the Company that either has been disposed of or is classified as held-for-sale are reported
in discontinued operations if the operations and cash flows of the componenthavebeenorwillbeeliminatedfromtheongoingoperations
of the Company as a result of the disposal transaction and the Company will not have any significant continuing involvement in the
operations of the component after the disposal transaction.
Earnings Per Common Share
Basic earnings per common share are computed based on the weighted average number of common shares outstanding during the period. The
difference between the number of shares assumed issued and number of shares assumed purchased represents the dilutive shares. Diluted earnings per
common share include the dilutive effect of the assumed: (i) exercise or issuance of stock-based awards using the treasury stock method; (ii) settlement of
stock purchase contracts underlying common equity units using the treasury stock method; and (iii) settlement of accelerated common stock repurchase
contract. Under the treasury stock method, exercise or issuance of stock-based awards and settlement of the stock purchase contracts underlying
common equity units is assumed to occur with the proceeds used to purchase common stock at the average market price for the period. See Notes 13,
18 and 20.
Litigation Contingencies
The Company is a party to a number of legal actions and is involved in a number of regulatory investigations. Given the inherent
unpredictability of these matters, it is difficult to estimate the impact on the Company’s financial position. Liabilities are established when it
is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. On a quarterly and annual basis, the
Company reviews relevant information with respect to liabilities for litigation, regulatory investigations and litigation-related contingencies to
be reflected in the Company’s consolidated financial statements. It is possible that an adverse outcome in certain of the Company’s
litigation and regulatory investigations, or the use of different assumptions in the determination of amounts recorded could have a material
effect upon the Company’s consolidated net income or cash flows in particular quarterly or annual periods.
F-18 MetLife, Inc.
MetLife, Inc.
Notes to Consolidated Financial Statements — (Continued)