AIG 2015 Annual Report Download - page 238

ITEM 8 / NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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Separate accounts represent funds for which investment income and investment gains and losses accrue directly to the
policyholders who bear the investment risk. Each account has specific investment objectives and the assets are carried at fair
value. The assets of each account are legally segregated and are not subject to claims that arise from any of our other
businesses. The liabilities for these accounts are equal to the account assets. For a more detailed discussion of separate
accounts, see Note 13 herein.
Other liabilities consist of other funds on deposit, other payables, securities sold under agreements to repurchase, securities
sold but not yet purchased and derivative liabilities. We have entered into certain insurance and reinsurance contracts,
primarily in our Non-Life Insurance Companies 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. Income statement
accounts expressed in functional currencies are translated using average exchange rates during the period. 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 remeasured into that entity’s functional currency
resulting in exchange gains or losses recorded in income. The adjustments resulting from translation of financial statements of
foreign entities operating in highly inflationary economies are recorded in income.
Non-redeemable noncontrolling interest is the portion of equity (net assets) in a subsidiary not attributable, directly or
indirectly, to a parent.
Accounting Standards Adopted During 2015
Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure
In January 2014, the Financial Accounting Standards Board (FASB) issued an accounting standard that clarifies that a creditor
is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage
loan, so that the loan is derecognized and the real estate property is recognized, when either (i) the creditor obtains legal title
to the residential real estate property upon completion of a foreclosure or (ii) the borrower conveys all interest in the residential
real estate property to the creditor to satisfy the loan through completion of a deed in lieu of foreclosure or through a similar
legal agreement.
We adopted the standard on its required effective date of January 1, 2015. The adoption of this standard had no material effect
on our consolidated financial condition, results of operations or cash flows.