Travelers 2009 Annual Report Download - page 178

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
included in the earnings allocation in computing earnings per share (EPS) under the ‘‘two-class
method.’’ Under the guidance, participating securities are re-defined 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 using the ‘‘two-class method.’’ Outstanding unvested
restricted stock and deferred stock units issued under employee compensation programs containing
such dividend participation features are considered participating securities subject to the ‘‘two-class
method’’ in computing EPS rather than the ‘‘treasury stock method.’’
The guidance was effective for financial statements issued for fiscal years beginning after
December 15, 2008 and for interim periods within those years. In accordance with the provisions of the
guidance, all prior-period basic and diluted EPS data presented were restated to reflect the
retrospective application of its computational guidance. The adoption of the guidance on January 1,
2009 did not have a material effect on the Company’s basic or diluted EPS. See note 10.
Fair Value Measurements
In February 2008, the FASB issued updated guidance on fair value measurements, which permitted
a one-year deferral of the application of the fair value measurements and disclosures guidance for all
non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair
value in the financial statements on a recurring basis (at least annually). The adoption of the fair value
measurement guidance as it pertains to nonfinancial assets and nonfinancial liabilities on January 1,
2009 did not have a material effect on the Company’s results of operations, financial position or
liquidity.
In April 2009, the FASB issued updated guidance for determining when a transaction is not
orderly and for estimating fair value when there has been a significant decrease in the volume and level
of activity for an asset or liability. The guidance requires disclosure of the inputs and valuation
techniques used, as well as any changes in valuation techniques and inputs used during the period, to
measure fair value in interim and annual periods. In addition, the presentation of the fair value
hierarchy is required to be presented by major security type. The provisions of the guidance were
effective for annual and interim periods ending after June 15, 2009. The adoption of the guidance on
April 1, 2009 did not have a material effect on the Company’s results of operations, financial position
or liquidity.
In August 2009, the FASB issued updated guidance for the accounting for the fair value
measurement of liabilities. The guidance provides clarification that in certain circumstances, in which a
quoted price in an active market for the identical liability is not available, a company is required to
measure fair value using one or more of the following valuation techniques: the quoted price of the
identical liability when traded as an asset, the quoted prices for similar liabilities or similar liabilities
when traded as assets, and/or another valuation technique that is consistent with the principles of fair
value measurements. The guidance also clarifies that a company is not required to include an
adjustment for restrictions that prevent the transfer of the liability and, if an adjustment is applied to
the quoted price used in a valuation technique, the result is a Level 2 or 3 fair value measurement. The
guidance was effective for interim and annual periods beginning after August 27, 2009. The adoption of
the guidance on October 1, 2009 did not have any effect on the Company’s results of operations,
financial position or liquidity.
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