AIG 2006 Annual Report Download - page 199
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American International Group, Inc. and Subsidiaries
corresponding reductions in expense as they occur. The pre-tax
14. Stock Compensation Plans
cumulative effect of adoption, recognized as a reduction in stock-
Continued
based compensation of $46 million, was recorded as a cumula-
for shares subscribed for or granted on or after January 1, 2006 tive effect of an accounting change, net of tax. FAS 123R requires
and all previously granted but unvested awards as of January 1, AIG to reflect the cash savings resulting from excess tax benefits
2006. in its financial statements as cash flow from financing activities,
The adoption of FAS 123R resulted in share-based compensa- rather than as cash flow from operating activities as in prior
tion expense of approximately $17 million during 2006, related to periods. The amount of this excess tax benefit for 2006 was
awards which were accounted for under the provisions of $27.9 million.
Accounting Principles Board Opinion No. 25, ‘‘Accounting for Stock Included in AIG’s consolidated statement of income for the
Issued to Employees.’’ FAS 123R also requires AIG to estimate year ended December 31, 2006 was pre-tax share-based compen-
forfeitures in calculating the expense relating to share-based sation expense of $353 million ($326 million after tax).
compensation, rather than recognizing these forfeitures and
The effect of the adoption of FAS 123R on the consolidated statements of income and cash flows for the year ended
December 31, 2006 was as follows:
Including
Effect of Effect of
Pre-adoption of Adoption of Adoption of
(in millions, except per share data) FAS 123R FAS 123R FAS 123R
Income before income taxes, minority interest and cumulative effect of an accounting
change $21,704 $ (17) $21,687
Provision for income taxes $ 6,539 $ (2) $ 6,537
Income before minority interest and cumulative effect of an accounting change $15,165 $ (15) $15,150
Cumulative effect of an accounting change, net of tax $ — $ 34 $ 34
Net income $14,029 $ 19 $14,048
Net cash provided by (used in) operating activities $ 6,857 $ (28) $ 6,829
Net cash provided by financing activities $59,762 $ 28 $59,790
Basic earnings per share $ 5.38 $0.01 $ 5.39
Diluted earnings per share $ 5.35 $0.01 $ 5.36
Form 10-K 2006 AIG 149