Travelers 2013 Annual Report Download - page 181

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounting Standards Not Yet Adopted
Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the
Obligation Is Fixed at the Reporting Date
In February 2013, the FASB issued updated guidance to resolve diversity in practice concerning the
recognition, measurement, and disclosure of obligations resulting from certain joint and several liability
arrangements for which the total amount under the arrangement is fixed at the reporting date. The
guidance requires that the reporting entity measure joint and several liability arrangements within the
scope of the guidance as the amount the reporting entity agreed to pay on the basis of its arrangement
among the co-obligors and any additional amount the reporting entity expects to pay on behalf of its
co-obligors. The updated guidance is effective for the quarter ending March 31, 2014. The adoption of
this guidance is not expected to have a material effect on the Company’s results of operations, financial
position or liquidity.
Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries
or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity
In March 2013, the FASB issued updated guidance to resolve diversity in practice concerning the
release of the cumulative foreign currency translation adjustment into net income when a parent sells a
part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a
subsidiary or group of assets within a foreign entity. When a company ceases to have a controlling
financial interest in a subsidiary within a foreign entity, the company should recognize any related
cumulative translation adjustment into net income only if the sale or transfer results in the complete or
substantially complete liquidation of the foreign entity in which the subsidiary had resided. Upon the
partial sale of an equity method investment that is a foreign entity, the company should release into
earnings a pro rata portion of the cumulative translation adjustment. Upon the partial sale of an equity
method investment that is not a foreign entity, the company should release into earnings the cumulative
translation adjustment if the partial sale represents a complete or substantially complete liquidation of
the foreign entity that holds the equity method investment. The updated guidance is effective for the
quarter ending March 31, 2014. The adoption of this guidance is not expected to have a material effect
on the Company’s results of operations, financial position or liquidity.
Accounting Policies
Investments
Fixed Maturity and Equity Securities
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, charged or
credited directly to other comprehensive income. Equity securities, which include public common and
non-redeemable preferred stocks, are classified as available for sale with changes in fair value, net of
income taxes, charged or credited directly to other comprehensive income.
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