Prudential 2015 Annual Report Download - page 126

PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
companies, while all other entities need to consider both the fundamental and typical characteristics of an investment company in
determining whether they qualify as investment companies. The new guidance became effective for interim or annual reporting periods that
began after December 15, 2013, and was applied prospectively. Adoption of the guidance did not have a significant effect on the
Company’s consolidated financial position, results of operations or financial statement disclosures.
In March 2013, the FASB issued updated guidance (ASU 2013-05, Foreign Currency Matters (Topic 830): Parent’s Accounting for the
Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment
in a Foreign Entity) regarding the recognition in net income of the cumulative translation adjustment upon the sale or loss of control of a business
or group of assets residing in a foreign subsidiary, or a loss of control of a foreign investment. This guidance became effective for interim or
annual reporting periods that began after December 15, 2013, and was applied prospectively. The amendments require an entity that ceases to
have a controlling financial interest in a subsidiary or group of assets within a foreign entity to release any related cumulative translation
adjustment into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which
the subsidiary or group of assets had resided. For an equity method investment that is a foreign entity, the partial sale guidance still applies. As
such, a pro rata portion of the cumulative translation adjustment should be released into net income upon a partial sale of such an equity method
investment. Adoption of the guidance did not have a significant effect on the Company’s consolidated financial position, results of operations or
financial statement disclosures.
In February 2013, the FASB issued updated guidance (ASU 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts
Reclassified Out of Accumulated Other Comprehensive Income) regarding the presentation of comprehensive income. Under the guidance,
an entity is required to separately present information about significant items reclassified out of AOCI by component as well as changes in
AOCI balances by component in either the financial statements or the notes to the financial statements. The guidance does not change the
items that are reported in other comprehensive income, does not change when an item of other comprehensive income must be reclassified
to net income, and does not amend any existing requirements for reporting net income or other comprehensive income. The guidance
became effective for interim or annual reporting periods that began after December 15, 2012, and was applied prospectively. The
disclosures required by this guidance are included in Note 7.
In December 2011 and January 2013, the FASB issued updated guidance (ASU 2013-01, Balance Sheet (Topic 210): Clarifying the
Scope of Disclosures about Offsetting Assets and Liabilities) regarding the disclosure of recognized derivative instruments (including
bifurcated embedded derivatives), repurchase agreements and securities borrowing/lending transactions that are offset in the statement of
financial position or are subject to an enforceable master netting arrangement or similar agreement (irrespective of whether they are offset
in the statement of financial position). The new guidance requires an entity to disclose information on both a gross and net basis about
instruments and transactions within the scope of this guidance. The new guidance became effective for interim or annual reporting periods
that began on or after January 1, 2013, and was applied retrospectively for all comparative periods presented. The disclosures required by
this guidance are included in Note 14.
Future Adoption of New Accounting Pronouncements
In May 2014, the FASB issued updated guidance (ASU 2014-09, Revenue from Contracts with Customers (Topic 606)) on accounting
for revenue recognition. The guidance is based on the core principle that revenue is recognized to depict the transfer of goods or services to
customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services.
The guidance also requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from
customer contracts, including significant judgments and changes in judgments and assets recognized from cost incurred to obtain or fulfill a
contract. Revenue recognition for insurance contracts is explicitly scoped out of the guidance. In August 2015, the FASB issued an update
to defer the original effective date of this guidance. As a result of the deferral, the new guidance is effective for annual periods and interim
periods within those annual periods, beginning after December 15, 2017, and must be applied using one of two retrospective application
methods. Early adoption is permitted only for annual reporting periods beginning after December 15, 2016, including interim reporting
periods within that reporting period. The Company is currently assessing the impact of the guidance on the Company’s consolidated
financial position, results of operations and financial statement disclosures.
In August 2014, the FASB issued updated guidance (ASU 2014-13, Consolidation (Topic 810): Measuring the Financial Assets and
the Financial Liabilities of a Consolidated Collateralized Financing Entity) for measuring the financial assets and the financial liabilities of
a consolidated collateralized financing entity. Under the guidance, an entity within scope is permitted to measure both the financial assets
and financial liabilities of a consolidated collateralized financing entity based on either the fair value of the financial assets or the financial
liabilities, whichever is more observable. If adopted, the guidance eliminates the measurement difference that exists when both are
measured at fair value. The Company adopted the updated guidance effective January 1, 2016, and applied the modified retrospective
method of adoption. This guidance did not have a significant impact on the Company’s consolidated financial position, results of
operations, or financial statement disclosures.
In February 2015, the FASB issued updated guidance (ASU 2015-02, Consolidation (Topic 810): Amendments to Consolidation
Analysis) that modifies the rules regarding consolidation. The pronouncement eliminates specialized guidance for limited partnerships and
similar legal entities, and removes the indefinite deferral for certain investment funds. The new guidance is effective for annual periods and
interim periods within those annual periods beginning after December 15, 2015, with early adoption permitted. The Company adopted the
updated guidance effective January 1, 2016, resulting in the deconsolidation of certain of its previously consolidated collateralized loan
obligations (“CLOs”), as its fee arrangements are no longer deemed variable interests in these entities. The Company continues to
124 Prudential Financial, Inc. 2015 Annual Report