Travelers 2009 Annual Report Download - page 177

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of The Travelers Companies, Inc.
(together with its subsidiaries, the Company). The preparation of the consolidated financial statements
in conformity with U.S. generally accepted accounting principles (GAAP) requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the consolidated financial statements and the reported
amounts of revenues and claims and expenses during the reporting period. Actual results could differ
from those estimates. Certain reclassifications have been made to the 2008 and 2007 financial
statements to conform to the 2009 presentation. All material intercompany transactions and balances
have been eliminated.
Adoption of Accounting Standards Updates
Noncontrolling Interests in Consolidated Financial Statements
In December 2007, the FASB issued updated guidance that established accounting and reporting
standards for noncontrolling interests in a subsidiary and for the deconsolidation of a subsidiary. In
addition, the guidance clarified that a noncontrolling interest in a subsidiary is an ownership interest in
the consolidated entity that should be reported as a component of equity rather than a liability in the
consolidated financial statements.
The provisions of the guidance were effective on a prospective basis beginning January 1, 2009,
except for the presentation and disclosure requirements, which were applied on a retrospective basis for
all periods presented. The adoption of the guidance on January 1, 2009 did not have a material effect
on the Company’s results of operations, financial position or liquidity.
Determination of the Useful Life of Intangible Assets
In April 2008, the FASB issued updated guidance that amended the factors that an entity should
consider in determining the useful life of a recognized intangible asset 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 guidance 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. Disclosure of an entity’s intent and/or ability to renew or extend
the arrangement is also required.
The guidance was effective for financial statements issued for fiscal years beginning after
December 15, 2008 and for interim periods within those fiscal years. The adoption of the guidance on
January 1, 2009 did not have a material effect on the Company’s results of operations, financial
position or liquidity and did not require additional disclosures related to existing intangible assets.
Participating Securities Granted in Share-Based Payment Transactions
In June 2008, the FASB issued updated guidance that addressed whether instruments granted in
share-based payment transactions are participating securities prior to vesting and, therefore, should be
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