AIG 2009 Annual Report Download - page 227

American International Group, Inc., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
standard permits the fair value option election on an instrument-by-instrument basis for eligible items existing at the
adoption date and at initial recognition of an asset or liability, or upon most events that give rise to a new basis of
accounting for that instrument.
AIG adopted the standard on January 1, 2008, its required effective date. The adoption of the standard with respect
to elections made in the Domestic and Foreign Life Insurance & Retirement Services segments resulted in an
after-tax decrease to 2008 opening retained earnings of $559 million. The adoption of this standard with respect to
elections made by AIGFP resulted in an after-tax decrease to 2008 opening retained earnings of $448 million.
Included in this amount are net unrealized gains of $105 million that were reclassified to retained earnings from
accumulated other comprehensive income (loss) related to available for sale securities recorded in the consolidated
balance sheet at January 1, 2008 for which the fair value option was elected.
See Note 5 herein for additional fair value disclosures.
Fair Value Measurements and Fair Value Option
The following table summarizes the after-tax increase (decrease) from adopting the accounting standards on Fair
Value Measurements and Fair Value Option on the opening shareholders’ equity accounts:
Accumulated Cumulative
Other Effect of
At January 1, 2008 Comprehensive Retained Accounting
(in millions) Income/(Loss) Earnings Changes
Fair Value Measurements $ - $ 4 $ 4
Fair Value Option (105) (1,007) (1,112)
Cumulative effect of change in accounting principles $ (105) $ (1,003) $ (1,108)
Offsetting of Amounts Related to Certain Contracts
In April 2007, the FASB issued an accounting standard that permitted companies to offset cash collateral
receivables or payables against derivative instruments under certain circumstances. AIG adopted the provisions of the
standard effective January 1, 2008, which requires retrospective application to all prior periods presented. At
December 31, 2008, the amounts of cash collateral received and posted that were offset against net derivative
positions totaled $7.1 billion and $19.2 billion, respectively. The cash collateral received and paid related to AIGFP
derivative instruments was previously recorded in Other liabilities and Premiums and other receivables. Cash
collateral received related to non-AIGFP derivative instruments was previously recorded in Other liabilities.
Disclosures about Credit Derivatives and Certain Guarantees
In September 2008, the FASB issued an accounting standard that requires additional disclosures by sellers of credit
derivatives, including derivatives embedded in a hybrid instrument. The standard also requires an additional
disclosure about the current status of the payment/performance risk of a guarantee. The additional disclosures are
included in Note 11 herein.
Fair Value of Financial Assets in Inactive Markets
In October 2008, the FASB issued an accounting standard that provides guidance clarifying certain aspects with
respect to the fair value measurements of a security when the market for that security is inactive. AIG adopted this
guidance in the third quarter of 2008. The effects of adopting this standard on AIG’s consolidated financial condition
and results of operations were not material.
219 AIG 2009 Form 10-K