Travelers 2007 Annual Report Download - page 167

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Business Combinations
In December 2007, the FASB issued Revised Statement of Financial Accounting Standards
No. 141R, Business Combinations (FAS 141R), a replacement of FAS 141, Business Combinations
(FAS 141). FAS 141R provides revised guidance on how an acquirer recognizes and measures in its
financial statements, the identifiable assets acquired, the liabilities assumed, and any noncontrolling
interest in the acquiree. In addition, it provides revised guidance on the recognition and measurement
of goodwill acquired in the business combination.
FAS 141R also provides guidance specific to the recognition, classification, and measurement of
assets and liabilities related to insurance and reinsurance contracts acquired in a business combination.
FAS 141R applies to business combinations for acquisitions occurring on or after January 1, 2009.
The Company does not expect the provisions of FAS 141R to have a material effect on its results of
operations, financial position or liquidity.
Noncontrolling Interests in Consolidated Financial Statements
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160,
Noncontrolling Interests in Consolidated Financial Statements—an amendment of Accounting Research
Bulletin No. 51 (FAS 160). FAS 160 amends Accounting Research Bulletin No. 51 to establish
accounting and reporting standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. In addition, it clarifies that a noncontrolling interest in a subsidiary is
an ownership interest in the consolidated entity that should be reported as a component of equity in
the consolidated financial statements.
FAS 160 is effective on a prospective basis beginning January 1, 2009, except for the presentation
and disclosure requirements which are applied on a retrospective basis for all periods presented. The
Company does not expect the provisions of FAS 160 to have a material effect on its results of
operations, financial position or liquidity.
Accounting Policies
Investments
Fixed maturities include bonds, notes and redeemable preferred stocks. Fixed maturities, including
instruments subject to securities lending agreements, are classified as available for sale and are
reported at fair value, with unrealized investment gains and losses, net of income taxes, credited or
charged directly to accumulated other changes in equity from nonowner sources. Equity securities,
which include common and nonredeemable preferred stocks, are classified as available for sale with
changes in fair value, net of income tax, charged or credited directly to accumulated other changes in
equity from nonowner sources.
The Company’s real estate investments include warehouses, office buildings and other commercial
land and properties that are directly owned. Real estate properties are carried at cost less accumulated
depreciation. Buildings are depreciated on a straight-line basis over the shorter of the expected useful
life of the building or 39 years. Accumulated depreciation on real estate held for investment purposes
was $111 million and $82 million at December 31, 2007 and 2006, respectively. Real estate held for sale
is carried at the lower of cost or fair value less estimated costs to sell.
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