AIG 2012 Annual Report Download - page 231

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with these assets is reported within Interest Credited to Policyholder Account Balances in the Consolidated Statement
of Operations. Such amortization expense totaled $162 million, $239 million and $146 million for the years ended
December 31, 2012, 2011 and 2010, respectively.
The cost of buildings and furniture and equipment is depreciated principally on a straight-line basis over their
estimated useful lives (maximum of 40 years for buildings and 10 years for furniture and equipment). Expenditures
for maintenance and repairs are charged to income as incurred; expenditures for improvements are capitalized and
depreciated. We periodically assess the carrying value of our real estate for purposes of determining any asset
impairment. Capitalized software costs, which represent costs directly related to obtaining, developing or upgrading
internal use software, are capitalized and amortized using the straight-line method over a period generally not
exceeding five years. Real estate, fixed assets and other long-lived assets are assessed for impairment when
impairment indicators exist.
Goodwill represents the future economic benefits arising from assets acquired in a business
combination that are not individually identified and separately recognized. Goodwill is tested for impairment annually,
or more frequently if circumstances indicate an impairment may have occurred. All of our goodwill was associated
with and allocated to the AIG Property Casualty Commercial and Consumer segments at December 31, 2012.
The impairment assessment involves first assessing qualitative factors to determine whether events or circumstances
exist that lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its
carrying amount. If, after assessing the totality of the events or circumstances, we determine it is more likely than not
that the fair value of a reporting unit is less than its carrying amount, the impairment assessment involves a two-step
process in which a quantitative assessment for potential impairment is performed. If potential impairment is present,
the amount of impairment is measured (if any) and recorded. Impairment is tested at the reporting unit level.
If we determine it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we
estimate the fair value of each reporting unit and compare the estimated fair value with the carrying amount of the
reporting unit, including allocated goodwill. The estimate of a reporting unit’s fair value may be based on one or a
combination of approaches including market-based earnings multiples of the unit’s peer companies, discounted
expected future cash flows, external appraisals or, in the case of reporting units being considered for sale, third-party
indications of fair value, if available. We consider one or more of these estimates when determining the fair value of
a reporting unit to be used in the impairment test.
If the estimated fair value of a reporting unit exceeds its carrying value, goodwill is not impaired. If the carrying value
of a reporting unit exceeds its estimated fair value, goodwill associated with that reporting unit potentially is impaired.
The amount of impairment, if any, is measured as the excess of the carrying value of the goodwill over the implied
fair value of the goodwill. The implied fair value of the goodwill is measured as the excess of the fair value of the
reporting unit over the amounts that would be assigned to the reporting unit’s assets and liabilities in a hypothetical
business combination. An impairment charge is recognized in earnings to the extent of the excess. AIG Property
Casualty manages its assets on an aggregate basis and does not allocate its assets, other than goodwill, between its
operating segments. Therefore, the carrying value of the reporting units was determined by allocating the carrying
value of AIG Property Casualty to those units based upon an internal capital allocation model.
In connection with the announcement of the ILFC sale, discussed in Note 4, and management’s determination that
the reporting unit met the held-for-sale criteria, management tested the remaining goodwill of the reporting unit for
impairment. Based on the results of the goodwill impairment test, we determined that all of the goodwill allocated to
the reporting unit should be impaired and, accordingly, recognized a goodwill impairment charge in the fourth quarter
of 2012.
At December 31, 2012, we performed our annual goodwill impairment test. Based on the results of the goodwill
impairment test, we concluded that the remaining goodwill was not impaired.
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AIG 2012 Form 10-K214
(j) Goodwill:
ITEM 8 / NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES