AIG 2009 Annual Report Download - page 210

American International Group, Inc., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of American International Group, Inc. (AIG), its
controlled subsidiaries, and variable interest entities in which AIG is the primary beneficiary. Entities that AIG does
not consolidate but in which it holds 20 percent to 50 percent of the voting rights and/or has the ability to exercise
significant influence are accounted for under the equity method.
Certain of AIG’s foreign subsidiaries included in the consolidated financial statements report on a fiscal year ended
November 30. The effect on AIG’s consolidated financial condition and results of operations of all material events
occurring between November 30 and December 31 for all periods presented has been recorded.
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally
accepted accounting principles (GAAP). AIG evaluated the need to disclose events that occurred subsequent to the
balance sheet date through February 26, 2010, the date the financial statements were issued. All material
intercompany accounts and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires the application of accounting policies
that often involve a significant degree of judgment. AIG considers that its accounting policies that are most dependent
on the application of estimates and assumptions, and therefore viewed as critical accounting estimates, are those
relating to items considered by management in the determination of
• AIG’s ability to continue as a going concern;
• liability for general insurance unpaid claims and claims adjustment expenses;
• future policy benefits for life and accident and health contracts;
• recoverability of deferred policy acquisition costs (DAC);
• estimated gross profits for investment-oriented products;
• the allowance for finance receivable losses;
• flight equipment recoverability;
• other-than-temporary impairments;
• goodwill impairment;
• liabilities for legal contingencies;
• estimates with respect to income taxes, including recoverability of deferred tax assets; and
• fair value measurements of certain financial assets and liabilities, including credit default swaps and AIG’s
economic interest in Maiden Lane II LLC (ML II) and equity interest in Maiden Lane III LLC
(ML III) (together, the Maiden Lane Interests). See Note 5 herein.
These accounting estimates require the use of assumptions about matters, some of which are highly uncertain at the
time of estimation. To the extent actual experience differs from the assumptions used, AIG’s consolidated financial
condition, results of operations and cash flows would be materially affected.
Revisions and Reclassifications
In 2009, AIG reclassified the paid-in capital in excess of par value, net of issuance costs, related to its Series C
Perpetual, Convertible, Participating Preferred Stock, par value $5.00 per share (AIG Series C Preferred Stock),
AIG 2009 Form 10-K 202