Travelers 2014 Annual Report Download - page 173

Table of Contents
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounting for Share
- Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite
Service Period
In June 2014, the FASB issued updated guidance to resolve diversity in practice concerning employee share
- based payments that contain
performance targets that could be achieved after the requisite service period. Many reporting entities account for performance targets that could be
achieved after the requisite service period as performance conditions that affect the vesting of the award and, therefore, do not reflect the
performance targets in the estimate of the grant
- date fair value of the award. Other reporting entities treat those performance targets as nonvesting
conditions that affect the grant
- date fair value of the award.
The updated guidance requires that a performance target that affects vesting and that can be achieved after the requisite service period be
treated as a performance condition. As such, the performance target that affects vesting should not be reflected in estimating that fair value of the
award at the grant date. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be
achieved and should represent the compensation cost attributable to the periods for which service has been rendered. If the performance target
becomes probable of being achieved before the end of the service period, the remaining unrecognized compensation cost for which requisite
service has not yet been rendered is recognized prospectively over the remaining service period. The total amount of compensation cost
recognized during and after the service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those
awards that ultimately vest.
The updated guidance is effective for annual and interim periods beginning after December 15, 2015, with early adoption permitted. The
adoption of this guidance is not expected to have a material effect on the Company's results of operations, financial position or liquidity.
Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern
In August 2014, the FASB issued guidance to address the diversity in practice in determining when there is substantial doubt about an entity's
ability to continue as a going concern and when an entity must disclose certain relevant conditions and events. The new guidance requires an
entity to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to
continue as a going concern within one year after the date that the financial statements are issued (or available to be issued). The new guidance
allows the entity to consider the mitigating effects of management's plans that will alleviate the substantial doubt and requires certain disclosures
when substantial doubt is alleviated as a result of consideration of management's plans. If conditions or events raise substantial doubt that is not
alleviated, an entity should disclose that there is substantial doubt about the entity's ability to continue as a going concern within one year after
the date that the financial statements are issued (or available to be issued), along with the principal conditions or events that raise substantial
doubt, management's evaluation of the significance of those conditions or events in relation to the entity's ability to meet its obligations and
management's plans that are intended to mitigate those conditions.
The guidance is effective for annual periods ending after December 15, 2016, and interim and annual periods thereafter.
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