AIG 2010 Annual Report Download - page 242

American International Group, Inc., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the excess of amounts previously recorded upon the consolidation of previously
unconsolidated VIEs, as a result of the adoption of the new standard on January 1, 2010:
(in billions)
Assets $ 8.2
Liabilities 7.1
Redeemable noncontrolling interest 1.1
Equity:
Accumulated deficit 0.2
Accumulated other comprehensive income (0.3)
Other noncontrolling interests 0.1
Total liabilities and equity $ 8.2
In February 2010, the FASB also issued an update to the aforementioned accounting standard that defers the
revised consolidation rules for variable interest entities with attributes of, or similar to, an investment company or
money market fund. The primary effect of this deferral for AIG is that AIG will continue to apply the
consolidation rules in effect before the amended guidance discussed above for its interests in eligible entities, such
as certain mutual funds.
Accounting for Embedded Credit Derivatives
In March 2010, the FASB issued an accounting standard that amends the accounting for embedded credit
derivative features in structured securities that redistribute credit risk in the form of subordination of one financial
instrument to another. The new standard clarifies how to determine whether embedded credit derivative features,
including those in collateralized debt obligations (CDOs), credit-linked notes (CLNs), synthetic CDOs and CLNs
and other synthetic securities (e.g., commercial and residential mortgage-backed securities issued by securitization
entities that wrote credit derivatives), are considered to be embedded derivatives that should be analyzed for
potential bifurcation and separate accounting or, alternatively, for fair value accounting in connection with the
application of the fair value option to the entire hybrid instrument. AIG adopted the new standard on July 1, 2010
and recorded a reclassification of $256 million of synthetic securities from Bonds available for sale to Bond
trading securities and also reclassified a gain of $68 million from Accumulated other comprehensive income to
Accumulated deficit as of July 1, 2010. Upon adoption, AIG accounts for its investments in synthetic securities
otherwise requiring bifurcation at fair value, with changes in fair value recognized in earnings. The adoption of
this new standard did not have a material effect on AIG’s consolidated financial condition, results of operations or
cash flows.
Disclosure about the Credit Quality of Financing Receivables
In July 2010, the FASB issued guidance to enhance disclosures about the credit quality of financing receivables
that are not measured at fair value. This guidance requires a greater level of disaggregated information about the
credit quality of financing receivables and the related allowance for credit losses. In addition, this guidance
requires disclosure of credit quality indicators, past due information, and modifications of financing receivables.
The disclosures as of the end of a reporting period became effective for interim and annual reporting periods
ended on or after December 15, 2010 and are included herein. The disclosures about activity that occurs during a
reporting period became effective for interim and annual reporting periods beginning on or after December 15,
2010. In January 2011, the FASB issued an accounting standard update that temporarily defers the effective date
for disclosures on modifications of financing receivables by creditors.
226 AIG 2010 Form 10-K