Travelers 2011 Annual Report Download - page 176

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounting Standards Not Yet Adopted
Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts
In October 2010, the FASB issued updated guidance to address diversity in practice for the
accounting for costs associated with acquiring or renewing insurance contracts. This guidance modifies
the definition of acquisition costs to specify that a cost must be directly related to the successful
acquisition of a new or renewal insurance contract in order to be deferred. If application of this
guidance would result in the capitalization of acquisition costs that had not previously been capitalized
by a reporting entity, the entity may elect not to capitalize those costs.
The updated guidance is effective for the quarter ending March 31, 2012. The adoption of this
guidance is not expected to have any effect on the Company’s results of operations, financial position
or liquidity.
Transfers and Servicing
In April 2011, the FASB issued updated guidance related to the accounting for repurchase
agreements and other agreements that entitle and obligate a transferor to repurchase or redeem
financial assets before their maturity. The updated guidance eliminates the criteria to assess whether a
transferor is required to have the ability to repurchase or redeem the financial assets in order to
demonstrate effective control over the transferred asset. Transferors that maintain effective control over
a transferred asset are required to account for the transaction as a secured borrowing rather than a
sale.
The updated guidance is effective for the quarter ending March 31, 2012. The updated guidance
applies to transactions or modifications of existing transactions that occur on or after the effective date.
The adoption of this guidance is not expected to have any effect on the Company’s results of
operations, financial position or liquidity.
Presentation of Comprehensive Income
In June 2011, the FASB issued updated guidance to increase the prominence of items reported in
other comprehensive income by eliminating the option of presenting components of comprehensive
income as part of the statement of changes in shareholders’ equity. The updated guidance requires that
all nonowner changes in shareholders’ equity be presented either as a single continuous statement of
comprehensive income or in two separate but consecutive statements. The updated guidance is to be
applied retrospectively and is effective for the quarter ending March 31, 2012. Early adoption is
permitted.
The updated guidance will result in a change in the presentation of the Company’s consolidated
financial statements but will not have any impact on the Company’s results of operations, financial
position or liquidity.
Intangibles—Goodwill and Other
In September 2011, the FASB issued updated guidance that modifies the manner in which the
two-step impairment test of goodwill is applied. Under the updated guidance, an entity may assess
qualitative factors (such as changes in management, key personnel, strategy, key technology, or
customers) that may impact a reporting unit’s fair value and lead to the determination that it is more
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