Prudential 2012 Annual Report Download - page 127

PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES AND PRONOUNCEMENTS (continued)
In September 2011, the Financial Accounting Standards Board (“FASB”) issued updated guidance regarding the application of the
goodwill impairment test. The updated guidance allows an entity to first perform a qualitative assessment to determine whether the
existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than
its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair
value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is not necessary. However, if an
entity concludes otherwise, then it must perform the first step of the two-step impairment test by calculating the fair value of the reporting
unit and comparing the fair value with the carrying amount of the reporting unit. If the carrying amount of a reporting unit exceeds its fair
value, then the entity is required to perform the second step of the goodwill impairment test to measure the impairment loss, if any. An
entity has the option to bypass the qualitative assessment for any reporting unit in any period and to proceed directly to performing the first
step of the two-step goodwill impairment test. An entity may resume performing the qualitative assessment in any subsequent period. The
updated guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15,
2011. The Company’s early adoption of this guidance, as permitted, effective December 31, 2011, had no impact on the Company’s
consolidated financial position, results of operations, and financial statement disclosures.
In June 2011, the FASB issued updated guidance regarding the presentation of comprehensive income. The updated guidance
eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity.
Under the updated guidance, an entity has the option to present the total of comprehensive income, the components of net income, and the
components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but
consecutive statements. The updated guidance does not change the items that are reported in other comprehensive income or when an item
of other comprehensive income must be reclassified to net income. The Company opted to present the total of comprehensive income, the
components of net income, and the components of other comprehensive income in two separate but consecutive statements. The
Consolidated Financial Statements included herein reflect the adoption of this updated guidance.
In May 2011, the FASB issued updated guidance regarding the fair value measurements and disclosure requirements. The updated
guidance clarifies existing guidance related to the application of fair value measurement methods and requires expanded disclosures. This
new guidance is effective for the first interim or annual reporting period beginning after December 15, 2011 and should be applied
prospectively. The expanded disclosures required by this guidance are included in Note 20. Adoption of this guidance did not have a
material effect on the Company’s consolidated financial position or results of operations.
In April 2011, the FASB issued updated guidance regarding the assessment of effective control for repurchase agreements. This new
guidance is effective for the first interim or annual reporting period beginning on or after December 15, 2011 and should be applied
prospectively to transactions or modifications of existing transactions that occur on or after the effective date. The Company’s adoption of
this guidance did not have a material effect on the Company’s consolidated financial position, results of operations, and financial statement
disclosures.
In April 2011, the FASB issued updated guidance clarifying which restructurings constitute troubled debt restructurings. It is intended
to assist creditors in their evaluation of whether conditions exist that constitute a troubled debt restructuring. This new guidance is effective
for the first interim or annual reporting period beginning on or after June 15, 2011 and should be applied retrospectively to the beginning of
the annual reporting period of adoption. The Company’s adoption of this guidance in the third quarter of 2011 did not have a material effect
on the Company’s consolidated financial position, results of operations, or financial statement disclosures.
In December 2010, the FASB issued authoritative guidance for business combinations that modifies the first step of the goodwill
impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform the
second step of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more
likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that
an impairment may exist. The qualitative factors are consistent with existing authoritative guidance, which requires that goodwill of a
reporting unit be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not
reduce the fair value of a reporting unit below its carrying amount. This new guidance is effective for public entities for fiscal years, and
interim periods within those years, beginning after December 15, 2010. The Company’s adoption of this guidance effective January 1, 2011
did not have a material effect on the Company’s consolidated financial position, results of operations, and financial statement disclosures.
In December 2010, the FASB issued authoritative guidance that specifies that if a public entity presents comparative financial
statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during
the current year had occurred as of the beginning of the comparable prior annual reporting period only. This guidance expands the
supplemental pro forma disclosures required for business combinations to include a description of the nature and amount of material,
nonrecurring pro forma adjustments directly attributable to the business combination(s) included in the reported pro forma revenue and
earnings. This new guidance is effective prospectively for business combinations for which the acquisition date is on or after the beginning of
the first annual reporting period beginning on or after December 15, 2010. The Company adopted this guidance prospectively for business
combinations for which the acquisition date is on or after January 1, 2011. The disclosures included in Note 3 reflect this guidance.
In July 2010, the FASB issued updated guidance that requires enhanced disclosures related to the allowance for credit losses and the
credit quality of a company’s financing receivable portfolio. The disclosures as of the end of a reporting period are effective for interim and
annual reporting periods ending on or after December 15, 2010. The Company adopted this guidance effective December 31, 2010. The
disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning after
December 15, 2010. The required disclosures are included above and in Note 4. In January 2011, the FASB deferred the disclosures
required by this guidance related to troubled debt restructurings. These disclosures are effective for the first interim or annual reporting
Prudential Financial, Inc. 2012 Annual Report 125