Travelers 2015 Annual Report Download - page 171

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Interest—Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs
In April 2015, the FASB issued updated guidance to clarify the required presentation of debt
issuance costs. The amended guidance requires that debt issuance costs be presented in the balance
sheet as a direct reduction from the carrying amount of the recognized debt liability, consistent with
the treatment of debt discounts. Amortization of debt issuance costs is to be reported as interest
expense. The recognition and measurement guidance for debt issuance costs are not affected by the
updated guidance. The updated guidance is effective for reporting periods beginning after
December 15, 2015. Early adoption is permitted. The updated guidance is consistent with the
Company’s accounting policy and its adoption will not have any effect on the Company’s results of
operations, financial position or liquidity.
Business Combinations: Simplifying the Accounting for Measurement-Period Adjustments
In September 2015, the FASB issued updated guidance regarding business combinations that
requires an acquirer to recognize post-close measurement adjustments for provisional amounts in the
period the adjustment amounts are determined rather than retrospectively. The acquirer is also
required to recognize, in the same period’s financial statements, the effect on earnings of changes in
depreciation, amortization, or other income effects, if any, as a result of the provisional amount,
calculated as if the accounting had been completed at the acquisition date. The updated guidance is to
be applied prospectively effective for annual and interim periods beginning after December 15, 2015. In
connection with business combinations which have already been completed, the adoption of this
guidance is not expected to have a material effect on the Company’s results of operations, financial
position or liquidity.
Financial Instruments—Overall: Recognition and Measurement of Financial Assets and Financial Liabilities
In January 2016, the FASB issued updated guidance to address the recognition, measurement,
presentation, and disclosure of certain financial instruments. The updated guidance requires equity
investments, except those accounted for under the equity method of accounting, that have readily
determinable fair value to be measured at fair value with changes in fair value recognized in net
income. Equity investments that do not have readily determinable fair values may be remeasured at fair
value either upon the occurrence of an observable price change or upon identification of an
impairment. A qualitative assessment for impairment is required for equity investments without readily
determinable fair values. The updated guidance also eliminates the requirement to disclose the method
and significant assumptions used to estimate the fair value of financial instruments measured at
amortized cost on the balance sheet. The updated guidance is effective for the quarter ending
March 31, 2018 and will require recognition of a cumulative effect adjustment at adoption. The
Company will not be able to determine the impact that the updated guidance will have on its results of
operations until the updated guidance is adopted, but does not currently expect the adoption of this
guidance to impact its financial position or liquidity.
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