MetLife 2007 Annual Report Download - page 118

Nos. FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments
(“FSP 115-1”), which nullifies the accounting guidance on the determination of whether an investment is other-than-temporarily impaired
as set forth in EITF 03-1. As required by FSP 115-1, the Company adopted this guidance on a prospective basis, which had no material
impact on the Company’s consolidated financial statements, and has provided the required disclosures.
In December 2004, the FASB issued FSP No. FAS 109-2, Accounting and Disclosure Guidance for the Foreign Earnings Repatriation
Provision within the American Jobs Creation Act of 2004 (“FSP 109-2”). The American Jobs Creation Act of 2004 (“AJCA”) introduced a
one-time dividend received deduction on the repatriation of certain earnings to a U.S. taxpayer. FSP 109-2 provides companies additional
time beyond the financial reporting period of enactment to evaluate the effects of the AJCA on their plans to repatriate foreign earnings for
purposes of applying SFAS No. 109, Accounting for Income Taxes. During 2005, the Company recorded a $27 million income tax benefit
related to the repatriation of foreign earnings pursuant to Internal Revenue Code Section 965 for which a U.S. deferred income tax
provision had previously been recorded. As of January 1, 2006, the repatriation provision of the AJCA no longer applies to the Company.
Future Adoption of New Accounting Pronouncements
Fair Value
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a
framework for measuring fair value and requires enhanced disclosures about fair value measurements. Effective January 1, 2008, the
Company adopted SFAS 157 and applied the provisions of the statement prospectively to assets and liabilities measured and disclosed at
fair value. In addition to new disclosure requirements, the adoption of SFAS 157 changes the valuation of certain freestanding derivatives
by moving from a mid to bid pricing convention as well as changing the valuation of embedded derivatives associated with annuity
contracts. The change in valuation of embedded derivatives associated with annuity contracts results from the incorporation of risk margins
and the Company’s own credit standing in their valuation. While the Company does not expect such changes in valuation to have a material
impact on the Company’s financial statements at January 1, 2008, the addition of risk margins and the Company’s own credit spread in the
valuation of embedded derivatives associated with annuity contracts may result in significant volatility in the Company’s consolidated net
income.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”).
SFAS 159 permits entities the option to measure most financial instruments and certain other items at fair value at specified election dates
and to report related unrealized gains and losses in earnings. The fair value option is generally applied on an instrument-by-instrument
basis and is generally an irrevocable election. Effective January 1, 2008, the Company has elected the fair value option on fixed maturity
securities backing certain pension products sold in Brazil. Previously, these fixed maturity securities were accounted for as availa-
ble-for-sale securities in accordance with FAS 115. The Company’s insurance joint venture in Japan also elected the fair value option for its
single premium deferred annuities and supporting assets. These elections are not expected to have a material impact on the Company’s
retained earnings or equity as of January 1, 2008.
In June 2007, the AICPA issued SOP 07-1, Clarification of the Scope of the Audit and Accounting Guide Investment Companies and
Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies (“SOP 07-1”) . Upon adoption of
SOP 07-1, the Company must also adopt the provisions of FASB Staff Position No. FSP FIN 46(r)-7, Application of FASB Interpretation
No. 46 to Investment Companies (“FSP FIN 46(r)-7”), which permanently exempts investment companies from applying the provisions of
FIN No. 46(r), Consolidation of Variable Interest Entities — An Interpretation of Accounting Research Bulletin No. 51, and its December
2003 revision (“FIN 46(r)”) to investments carried at fair value. SOP 07-1 provides guidance for determining whether an entity falls within the
scope of the AICPA Audit and Accounting Guide Investment Companies and whether investment company accounting should be retained
by a parent company upon consolidation of an investment company subsidiary or by an equity method investor in an investment company.
In certain circumstances, SOP 07-1 precludes retention of specialized accounting for investment companies (i.e., fair value accounting),
when similar direct investments exist in the consolidated group and are measured on a basis inconsistent with that applied to investment
companies. Additionally, SOP 07-1 precludes retention of specialized accounting for investment companies if the reporting entity does not
distinguish through documented policies the nature and type of investments to be held in the investment companies from those made in
the consolidated group where other accounting guidance is being applied. In February 2008, the FASB issued FSP No. SOP 7-1-1,
Effective Date of AICPA Statement of Position 07-1, which delays indefinitely the effective date of SOP 07-1. The Company is closely
monitoring further FASB developments.
In May 2007, the FASB issued FSP No. FIN 39-1, Amendment of FASB Interpretation No. 39 (“FSP 39-1”). FSP 39-1 amends FIN No. 39,
Offsetting of Amounts Related to Certain Contracts (“FIN 39”), to permit a reporting entity to offset fair value amounts recognized for the
right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) against fair value amounts recognized for
derivative instruments executed with the same counterparty under the same master netting arrangement that have been offset in
accordance with FIN 39. FSP 39-1 also amends FIN 39 for certain terminology modifications. FSP 39-1 applies to fiscal years beginning
after November 15, 2007. FSP 39-1 will be applied retrospectively, unless it is impracticable to do so. Upon adoption of FSP 39-1, the
Company is permitted to change its accounting policy to offset or not offset fair value amounts recognized for derivative instruments under
master netting arrangements. The adoption of FSP 39-1 will not have an impact on the Company’s financial statements.
Business Combinations
In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations — A Replacement of FASB Statement
No. 141 (“SFAS 141(r)”) and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — An Amendment of ARB
No. 51 (“SFAS 160”) which are effective for fiscal years beginning after December 15, 2008. Under SFAS 141(r) and SFAS 160:
• All business combinations (whether full, partial, or “step” acquisitions) result in all assets and liabilities of an acquired business being
recorded at fair value, with limited exceptions.
F-22 MetLife, Inc.
MetLife, Inc.
Notes to Consolidated Financial Statements — (Continued)