AIG 2012 Annual Report Download - page 233

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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. Fair values of securities sold but not yet purchased are based on current market prices. Fair
values of spot commodities sold but not yet purchased are based on current market prices of reference spot futures
contracts traded on exchanges.
For further discussion of secured financing arrangements, see Note 7 herein.
For a discussion of our accounting policies on long-term debt, see Note 15 herein.
For a discussion of our accounting policies on contingent liabilities, see Note 16 herein.
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
Total AIG shareholders’ equity. Functional currencies are generally the currencies of the local operating environment.
Financial statement accounts expressed in currencies other than the functional currency of a consolidated entity are
translated into that entity’s functional currency. 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.
For discussion of our accounting policies on noncontrolling interests, see Note 18
herein.
For a discussion of our accounting policies on earnings (loss) per share, see
Note 19 herein
Future Application of Accounting Standards
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Testing Indefinite-Lived Intangible Assets for Impairment
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In July 2012, the Financial Accounting Standards Board (FASB) issued an accounting standard that allows a
company the option to first assess qualitatively whether it is more likely than not that an indefinite-lived intangible
asset is impaired. A company is not required to calculate the fair value of an indefinite-lived intangible asset and
perform the quantitative impairment test unless the company determines it is more likely than not the asset is
impaired.
The standard is effective for annual and interim impairment tests performed for fiscal years beginning after
September 15, 2012. While early adoption was permitted, we adopted the standard on its required effective date of
January 1, 2013. We do not expect adoption of the standard to have a material effect on our consolidated financial
condition, results of operations or cash flows.
Disclosures about Offsetting Assets and Liabilities
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In February 2013 the FASB issued guidance that clarifies the scope of transactions subject to disclosures about
offsetting assets and liabilities. The guidance applies to derivatives, repurchase agreements and reverse purchase
agreements, and securities borrowing and securities lending transactions that are offset either in accordance with
specific criteria contained in FASB Accounting Standards Codification or subject to a master netting arrangement or
similar agreement.
The standard is effective for fiscal years and interim periods beginning on or after January 1, 2013, and will be
applied retrospectively to all comparative periods presented. We do not expect adoption of the standard to have a
material effect on our consolidated financial condition, results of operations or cash flows.
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AIG 2012 Form 10-K216
(q) Long-term debt:
(r) Contingent liabilities:
(s) Foreign currency:
(t) Noncontrolling interests:
(u) Earnings (loss) per share:
ITEM 8 / NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES