The Hartford 2008 Annual Report Download - page 344

Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. Basis of Presentation and Accounting Policies (continued)
FSP FAS 140-4 and FIN 46(R)-8, Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and
Interests in Variable Interest Entities
In December 2008, the FASB issued FSP FAS 140-4 and FIN 46(R)-8, “Disclosures by Public Entities (Enterprises) about
Transfers of Financial Assets and Interests in Variable Interest Entities.” The purpose of this FSP is to promptly improve
disclosures by public entities and enterprises until pending amendments to SFAS No. 140, “Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities” (“SFAS 140”), and FASB Interpretation No. 46 (R),
“Consolidation of Variable Interest Entities” (“FIN 46(R)”), are finalized and approved by the FASB. The FSP amends
SFAS 140 to require public entities to provide additional disclosures about transferors’ continuing involvements with
transferred financial assets. It also amends FIN 46(R) to require public enterprises, to provide additional disclosures about
their involvement with variable interest entities. FSP FAS 140-4 and FIN 46(R)-8 is effective for financial statements issued
for fiscal years and interim periods ending after December 15, 2008. For periods after the initial adoption date, comparative
disclosures are required. The Company adopted the FSP on December 31, 2008. See Note 5 for the new disclosures.
Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB
Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161
In September 2008, the FASB issued FSP No. FAS 133-1 and FIN 45-4 “Disclosures about Credit Derivatives and Certain
Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective
Date of FASB Statement No. 161” (“FSP FAS 133-1 and FIN 45-4”). This FSP amends SFAS 133 to require disclosures by
entities that assume credit risk through the sale of credit derivatives including credit derivatives embedded in a hybrid
instrument. The intent of these enhanced disclosures is to enable users of financial statements to assess the potential effect
on its financial position, financial performance, and cash flows from these credit derivatives. This FSP also amends FASB
Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees
of Indebtedness of Others”, to require an additional disclosure about the current status of the payment/performance risk of a
guarantee. FSP FAS 133-1 and FIN 45-4 are effective for financial statements issued for fiscal years and interim periods
ending after November 15, 2008. For periods after the initial adoption date, comparative disclosures are required. The
Company adopted FSP FAS 133-1 and FIN 45-4 on December 31, 2008. See Note 5 for the new disclosures.
Fair Value Measurements
On January 1, 2008, the Company adopted SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which was issued by
the FASB in September 2006. The Company also adopted on January 1, 2008, the SFAS 157 related FASB Staff Position
(“FSP”) described below. For financial statement elements currently required to be measured at fair value, SFAS 157
redefines fair value, establishes a framework for measuring fair value under U.S. GAAP and enhances disclosures about fair
value measurements. The new definition of fair value focuses on the price that would be received to sell the asset or paid to
transfer the liability regardless of whether an observable liquid market price existed (an exit price). SFAS 157 establishes a
fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels
(“Level 1, 2, and 3”).
The Company applied the provisions of SFAS 157 prospectively to financial assets and financial liabilities that are required
to be measured at fair value under existing U.S. GAAP. The Company also recorded in opening retained earnings the
cumulative effect of applying SFAS 157 to certain customized derivatives measured at fair value in accordance with EITF
Issue No. 02-3, “Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes and Involved in Energy
Trading and Risk Management Activities” (“EITF 02-3”). See Note 4 for additional information regarding SFAS 157.
Specifically, see the SFAS 157 Transition discussion within Note 4 for information regarding the effects of applying SFAS
157 on the Company’s consolidated financial statements in 2008.
In February 2008, the FASB issued FSP No. FAS 157-2, “Effective Date of FASB Statement No. 157” (“FSP FAS 157-2”)
which delays the effective date of SFAS 157 to fiscal years beginning after November 15, 2008 for certain nonfinancial
assets and nonfinancial liabilities. Examples of applicable nonfinancial assets and nonfinancial liabilities to which FSP FAS
157-2 applies include, but are not limited to:
• Nonfinancial assets and nonfinancial liabilities initially measured at fair value in a business combination that are not
subsequently remeasured at fair value;
• Reporting units measured at fair value in the goodwill impairment test as described in SFAS No. 142, “Goodwill and
Other Intangible Assets” (“SFAS 142”), and nonfinancial assets and nonfinancial liabilities measured at fair value in
the SFAS 142 goodwill impairment test, if applicable; and
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009