AIG 2013 Annual Report Download - page 239

over the estimated lives of the contracts and are subject to the same adjustments due to changes in the assumptions
underlying EGPs as DAC.
Other liabilities consist of other funds on deposit, other payables, securities sold under agreements to repurchase
and securities sold but not yet purchased. We have entered into certain insurance and reinsurance contracts,
primarily in our AIG Property Casualty segment, that do not contain sufficient insurance risk to be accounted for as
insurance or reinsurance. Accordingly, the premiums received on such contracts, after deduction for certain related
expenses, are recorded as deposits within Other liabilities in the Consolidated Balance Sheets. Net proceeds of
these deposits are invested and generate Net investment income. As amounts are paid, consistent with the
underlying contracts, the deposit liability is reduced. Also included in Other liabilities are trade payables for the DIB
and GCM, which include option premiums received and payables to counterparties that relate to unrealized gains and
losses on futures, forwards, and options and balances due to clearing brokers and exchanges. Trade payables for
GCM also include cash collateral received from derivative counterparties that contractually cannot be netted against
derivative assets.
Securities sold but not yet purchased represent sales of securities 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.
Foreign currency: 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, 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.
In July 2012, the Financial Accounting Standards Board (FASB) issued an accounting standard that allows a
company, as a first step in an impairment review, to assess qualitatively whether it is more likely than not that an
indefinite-lived intangible asset is impaired. We are not required to calculate the fair value of an indefinite-lived
intangible asset and perform a quantitative impairment test unless we determine, based on the results of the
qualitative assessment, that it is more likely than not the asset is impaired.
The standard became effective for annual and interim impairment tests performed for fiscal years beginning after
September 15, 2012. We adopted the standard on its required effective date of January 1, 2013. The adoption of this
standard had no material effect on our consolidated financial condition, results of operations or cash flows.
In July 2013, the FASB issued an accounting standard that permits the Federal Funds Effective Swap Rate (or
Overnight Index Swap Rate) to be used as a U.S. benchmark interest rate for hedge accounting purposes in addition
to U.S. Treasury rates and LIBOR. The standard also removes the prohibition on the use of differing benchmark
rates when entering into similar hedging relationships.
The standard became effective on a prospective basis for qualifying new or redesignated hedging relationships
entered into on or after July 17, 2013 to the extent the Federal Funds Effective Swap Rate is used as a U.S.
benchmark interest rate for hedge accounting purposes. We adopted the standard on its effective date of July 17,
2013. The adoption of this standard had no material effect on our consolidated financial condition, results of
operations or cash flows.
Accounting Standards Adopted During 2013
Testing Indefinite-Lived Intangible Assets for Impairment
Inclusion of the Federal Funds Effective Swap Rate as a Benchmark Interest Rate for Hedge Accounting
Purposes
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AIG 2013 Form 10-K 221
ITEM 8 / NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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