Prudential 2002 Annual Report Download - page 101
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Please find page 101 of the 2002 Prudential annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Deferred income taxes are recognized, based on enacted rates, when assets and liabilities have different
values for financial statement and tax reporting purposes. A valuation allowance is recorded to reduce a deferred
tax asset to the amount expected to be realized.
Demutualization Costs and Expenses
Demutualization costs and expenses include the cost of engaging external accounting, actuarial, investment
banking, legal and other consultants to advise the Company, the New Jersey Department of Banking and
Insurance and the New York State Insurance Department in the demutualization process and related matters as
well as the cost of printing and postage for communications with policyholders and other administrative costs.
Demutualization costs and expenses for the year ended December 31, 2001 also include $340 million of
demutualization consideration paid to former Canadian branch policyholders pertaining to certain policies that
Prudential Insurance transferred to London Life Insurance Company in 1996 in connection with the sale of most
of its Canadian branch operations. Under the Plan of Reorganization, these policyholders were required to receive
demutualization compensation in the form of cash. All demutualization costs and expenses have been recorded in
the periods prior to demutualization.
New Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board (the “FASB”) issued SFAS No. 142, “Goodwill and
Other Intangible Assets.” SFAS No. 142 requires that an intangible asset acquired either individually or with a
group of other assets shall initially be recognized and measured based on fair value. An intangible asset with a
finite life is amortized over its useful life to the reporting entity; an intangible asset with an indefinite useful life,
including goodwill, is not amortized. All indefinite lived intangible assets shall be tested for impairment in
accordance with the statement. The Company adopted SFAS No. 142 as of January 1, 2002. See Note 8 for
additional information pertaining to goodwill and other intangible assets.
In August 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-
Lived Assets.” SFAS No. 144 eliminated the requirement that discontinued operations be measured at net
realizable value or that entities include losses that have not yet occurred. SFAS No. 144 eliminated the exception
to consolidation for a subsidiary for which control is likely to be temporary. The implementation of this provision
was not material to the Company’s financial position. SFAS No. 144 requires that long-lived assets that are to be
disposed of by sale be measured at the lower of book value or fair value less cost to sell. An impairment for assets
that are not to be disposed of is recognized only if the carrying amounts of long-lived assets are not recoverable
and exceed their fair values. Additionally, SFAS No. 144 expands the scope of discontinued operations to include
all components of an entity with operations and cash flows that (1) can be distinguished from the rest of the entity
and (2) will be eliminated from the ongoing operations of the entity in a disposal transaction. Consequently,
certain activities included in discontinued operations in the accompanying financial statements would not have
been recorded as discontinued operations prior to the adoption of SFAS No. 144. See Note 3 for additional
information pertaining to discontinued operations. SFAS No. 144 is effective for financial statements issued for
fiscal years beginning after December 15, 2001 and, generally, its provisions are to be applied prospectively.
In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal
Activities.” SFAS No. 146 requires that a liability for costs associated with an exit or disposal activity be
recognized and measured initially at fair value only when the liability is incurred. Prior to the adoption of SFAS
No. 146, such amounts were recorded upon the Company’s commitment to a restructuring plan. SFAS No. 146 is
effective for exit or disposal activities that are initiated after December 31, 2002. Accordingly, the Company will
adopt this statement for applicable transactions occurring on or after January 1, 2003.
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