AIG 2009 Annual Report Download - page 224

American International Group, Inc., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
structured settlement arrangement with no life contingency and (c) certain contracts that AIG has elected to account
for at fair value beginning in 2008.
See Note 5 herein for additional fair value disclosures.
(p) Other policyholder funds: Other policyholder funds are reported at cost and include any policyholders’ funds on
deposit that encompass premium deposits and similar items.
(q) Securities and spot commodities sold but not yet purchased, at fair value: Securities and spot commodities sold but
not yet purchased represent sales of securities and spot commodities not owned at the time of sale. The obligations
arising from such transactions are recorded on a trade-date basis and carried at fair value. Also included are
obligations under gold leases, which are accounted for as a debt host with an embedded gold derivative. Beginning
January 1, 2008, AIGFP elected the fair value option for these debt host contracts.
(r) Other liabilities: Other liabilities consist of other funds on deposit, and other payables. AIG has entered into
certain insurance and reinsurance contracts, primarily in its General Insurance segment, that do not contain sufficient
insurance risk to be accounted for as insurance or reinsurance. Accordingly, the premiums received on such contracts,
after deduction for certain related expenses, are recorded as deposits within Other liabilities in the Consolidated
Balance Sheet. Net proceeds of these deposits are invested and generate Net investment income. As amounts are
paid, consistent with the underlying contracts, the deposit liability is reduced. Also included in Other liabilities are
trade payables for AIGFP which include option premiums received and payables to counterparties that relate to
unrealized gains and losses on futures, forwards, and options and balances due to clearing brokers and exchanges.
(s) Commercial Paper and Extendible Commercial Notes and Long-Term Debt: AIG’s funding consists, in part, of
medium and long-term debt and commercial paper. Commercial paper, when issued at a discount, is recorded at the
proceeds received and accreted to its par value. Long-term debt is carried at the principal amount borrowed, net of
unamortized discounts or premiums. See Note 14 herein for additional information. Long-term debt also includes
liabilities connected to trust preferred stock principally related to outstanding securities issued by AIG Life Holdings
(US), Inc. (AIGLH), a wholly owned subsidiary of AIG. Cash distributions on such preferred stock are accounted for
as interest expense.
(t) FRBNY Credit Facility and Commercial Paper Funding Facility: In 2008, AIG obtained funding under the FRBNY
Credit Facility and the CPFF. Amounts borrowed under the FRBNY Credit Facility and the CPFF are carried at the
principal amount borrowed, and in the case of the FRBNY Credit Facility, also include accrued compounding interest
and fees, except for AIGFP’s CPFF borrowings which are carried at fair value.
(u) Contingent Liabilities: Amounts are accrued for the resolution of claims that have either been asserted or are
deemed probable of assertion if, in the opinion of management, it is both probable that a liability has been incurred
and the amount of the liability can be reasonably estimated. In many cases, it is not possible to determine whether a
liability has been incurred or to estimate the ultimate or minimum amount of that liability until years after the
contingency arises, in which case, no accrual is made until that time.
(v) Foreign Currency: Financial statement accounts expressed in foreign currencies are translated into U.S. dollars.
Functional currency assets and liabilities are translated into U.S. dollars generally using rates of exchange prevailing at
the balance sheet date of each respective subsidiary and the related translation adjustments are recorded as a separate
component of Accumulated other comprehensive income (loss), net of any related taxes, in consolidated shareholders’
equity. Functional currencies are generally the currencies of the local operating environment. Income statement
accounts expressed in functional currencies are translated using average exchange rates during the period. The
adjustments resulting from translation of financial statements of foreign entities operating in highly inflationary
economies are recorded in income. Exchange gains and losses resulting from foreign currency transactions are
recorded in income.
(w) Noncontrolling Interests: Noncontrolling nonvoting, callable, junior and senior preferred interests held by Federal
Reserve Bank of New York: Represents preferred interests in two wholly-owned SPVs formed to hold all the common
AIG 2009 Form 10-K 216