AIG 2009 Annual Report Download - page 342

American International Group, Inc., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
to the outside basis difference in U.S. companies and joint ventures, and $100 million related to the tax effect of the
unremitted earnings of foreign affiliates and the effect of actual dispositions.
Included in Additional paid-in capital is a deferred tax charge primarily related to the step-up in tax basis of assets
associated with the AIA and ALICO SPV transactions and the related tax valuation allowance provided with respect
to ALICO, offset by the tax effect of those transactions on the outside basis difference of certain AIG subsidiaries.
The following table presents the components of the net deferred tax asset:
December 31,
(in millions) 2009 2008
Deferred tax assets:
Losses and tax credit carryforwards $ 26,204 $ 25,632
Unrealized loss on investments 8,651 12,401
Adjustment to life policy reserves 2,794 3,226
Accruals not currently deductible, and other 2,616 1,454
Investments in foreign subsidiaries and joint ventures 2,194 -
Loss reserve discount 1,613 2,105
Loan loss and other reserves 1,461 1,166
Unearned premium reserve reduction 1,467 1,179
Employee benefits 1,088 1,163
Unrealized losses related to available-for-sale debt securities -3,649
Total deferred tax assets*48,088 51,975
Deferred tax liabilities:
Deferred policy acquisition costs (12,110) (11,462)
Flight equipment, fixed assets and intangible assets (5,030) (5,593)
Unrealized gains related to available-for-sale debt securities (835) -
Investments in foreign subsidiaries and joint ventures -(2,321)
Other (524) (717)
Total deferred tax liabilities (18,499) (20,093)
Net deferred tax asset before valuation allowance 29,589 31,882
Valuation allowance (23,705) (20,896)
Net deferred tax asset $ 5,884 $ 10,986
* AIG has federal net operating loss carryforwards as of December 31, 2009 and 2008 in the amount of $35.2 billion and $47.3 billion, and unused
foreign tax credits of $2.8 billion and $2.2 billion, respectively. Net operating loss carryforwards may be carried forward for twenty years from the date
they were incurred while unused foreign tax credits may be carried forward for ten years from the date they were incurred. As of December 31, 2009,
AIG has capital loss carryforwards of $22.4 billion, which will primarily expire in four years. AIG has recorded deferred tax assets for general
business credits of $257 million and $260 million, and deferred tax assets for minimum tax credits of $188 million and $250 million for the years
ending December 31, 2009 and 2008, respectively. Unused general business credits will expire in twenty years, while unused minimum tax credits are
available for future use without expiration.
Valuation Allowances on Deferred Tax Assets:
The application of U.S. GAAP requires AIG to evaluate the recoverability of deferred tax assets and establish a
valuation allowance, if necessary, to reduce the deferred tax asset to an amount that is more likely than not to be
realized (a likelihood of more than 50 percent). Significant judgment is required to determine whether a valuation
allowance is necessary and the amount of such valuation allowance, if appropriate.
AIG 2009 Form 10-K 334