Travelers 2008 Annual Report Download - page 175

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
derivatives, quantitative disclosures about fair value amounts of, and gains and losses on, derivative
instruments, and disclosures about credit-risk-related contingent features in derivative agreements. The
provisions of FAS 161 are effective for financial statements issued for fiscal years beginning after
November 15, 2008.
Determination of the Useful Life of Intangible Assets
In April 2008, the FASB issued FASB Staff Position (FSP) FAS 142-3, Determination of the Useful
Life of Intangible Assets. The FSP amends the factors that an entity should consider in determining the
useful life of a recognized intangible asset under FAS 142, Goodwill and Other Intangible Assets, to
include the entity’s historical experience in renewing or extending similar arrangements, whether or not
the arrangements have explicit renewal or extension provisions. Previously, an entity was precluded
from using its own assumptions about renewal or extension of an arrangement where there was likely
to be substantial cost or modifications. Entities without their own historical experience should consider
the assumptions market participants would use about renewal or extension. The amendment may result
in the useful life of an entity’s intangible asset differing from the period of expected cash flows that was
used to measure the fair value of the underlying asset using the market participant’s perceived value.
The FSP also requires disclosure to provide information on an entity’s intent and/or ability to renew or
extend the arrangement.
The FSP is effective for financial statements issued for fiscal years beginning after December 15,
2008, and for interim periods within those fiscal years. Early adoption is prohibited. The requirements
for determining the useful life of intangible assets apply to intangible assets acquired after January 1,
2009. The disclosure requirements will be applied prospectively to all intangible assets recognized as of,
and subsequent to, the effective date.
Participating Securities Granted in Share-Based Payment Transactions
In June 2008, the FASB issued FASB Staff Position (FSP) EITF 03-6-1, Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating Securities. This FSP addresses
whether instruments granted in share-based payment transactions are participating securities prior to
vesting and, therefore, should be included in the earnings allocation in computing earnings per share
(EPS) under the two-class method described in FAS 128, Earnings per Share. The FSP redefines
participating securities to include unvested share-based payment awards that contain non-forfeitable
dividends or dividend equivalents as participating securities to be included in the computation of EPS
pursuant to the ‘‘two-class method.’’ Outstanding unvested restricted stock and deferred stock units
issued under employee compensation programs containing such dividend participation features would
be considered participating securities subject to the ‘‘two-class method’’ in computing EPS rather than
the ‘‘treasury stock method.’’
The FSP is effective for financial statements issued for fiscal years beginning after December 15,
2008 and for interim periods within those years. Early application was not permitted. The Company has
estimated that the application of the FSP computational guidance will reduce previously reported basic
EPS for the years ended December 31, 2008 and 2007 by $0.03 per share and $0.04 per share,
respectively, and reduce previously reported diluted EPS by $0.01 per share for each of the years ended
December 31, 2008 and 2007. In accordance with provisions of the FSP, upon adoption in 2009, all
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