MetLife 2010 Annual Report Download - page 113

Stock-Based Compensation
As more fully described in Note 18, the Company grants certain employees and directors stock-based compensation awards under
various plans that are subject to specific vesting conditions. The cost of all stock-based transactions is measured at fair value at grant date
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. An estimation
of future forfeitures of stock-based awards is incorporated into the determination of compensation expense when recognizing expense over
the requisite service period.
Foreign Currency
Assets, liabilities and operations of foreign affiliates and subsidiaries are recorded based on the functional currency of each entity. The
determination of the functional currency is made based on the appropriate economic and management indicators. With the exception of
certain foreign operations, primarily Japan, where multiple functional currencies exist, the local currencies of foreign operations are the
functional currencies. Assets and liabilities of foreign affiliates and subsidiaries are translated from the functional currency to U.S. dollars 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 resulting translation adjustments are charged or credited directly to other comprehensive income or loss, net of
applicable taxes. Gains and losses from foreign currency transactions, including the effect of re-measurement of monetary assets and
liabilities to the appropriate functional currency, are reported as part of 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 component have been or will be eliminated from the ongoing operations 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, or their equivalent,
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 contracts. 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 14, 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.
Separate Accounts
Separate accounts are established in conformity with insurance laws and are generally not chargeable with liabilities that arise from any
other business of the Company. Separate account assets are subject to general account claims only to the extent the value of such assets
exceeds the separate account liabilities. Assets within the Company’s separate accounts primarily include: mutual funds, fixed maturity and
equity securities, mortgage loans, derivatives, hedge funds, other limited partnership interests, short-term investments and cash and cash
equivalents. The Company reports separately, as assets and liabilities, investments held in separate accounts and liabilities of the separate
accounts if (i) such separate accounts are legally recognized; (ii) assets supporting the contract liabilities are legally insulated from the
Company’s general account liabilities; (iii) investments are directed by the contractholder; and (iv) all investment performance, net of contract
fees and assessments, is passed through to the contractholder. The Company reports separate account assets meeting such criteria at their
fair value which is based on the estimated fair values of the underlying assets comprising the portfolios of an individual separate account.
Investment performance (including investment income, net investment gains (losses) and changes in unrealized gains (losses)) and the
corresponding amounts credited to contractholders of such separate accounts are offset within the same line in the consolidated statements
of operations. Separate accounts credited with a contractual investment return are combined on a line-by-line basis with the Company’s
general account assets, liabilities, revenues and expenses and the accounting for these investments is consistent with the methodologies
described herein for similar financial instruments held within the general account. Unit-linked separate account investments which are
directed by contractholders but do not meet one or more of the other above criteria are included in trading and other securities.
The Company’s revenues reflect fees charged to the separate accounts, including mortality charges, risk charges, policy administration
fees, investment management fees and surrender charges.
F-24 MetLife, Inc.
MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)