Aetna 2013 Annual Report Download - page 89

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Annual Report- Page 83
2. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally-
accepted accounting principles (“GAAP”) and include the accounts of Aetna and the subsidiaries that we control.
All significant intercompany balances have been eliminated in consolidation. The Company has evaluated
subsequent events from the balance sheet date through the date the financial statements were issued and determined
there were no other items to disclose other than those disclosed in Note 21 beginning on page 140.
Reclassifications
Certain reclassifications were made to 2011 and 2012 financial information to conform with 2013 presentation.
New Accounting Standards
Testing Intangibles for Impairment
Effective January 1, 2013, we adopted new accounting guidance for testing indefinite-lived intangible assets for
impairment. Under this guidance, an entity has the option first to assess qualitative factors to determine whether it is
more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying value. If
management determines that an indefinite-lived intangible asset's fair value is likely greater than its carrying value,
then no additional analysis is necessary, as the indefinite-lived intangible asset is not impaired. The adoption of this
new guidance did not have an impact on our financial position or operating results.
Future Application of Accounting Standards
Fees Paid to the Federal Government by Health Insurers
Effective January 1, 2014, we will adopt new accounting guidance relating to the recognition and income statement
reporting of the mandated fee to be paid to the federal government by health insurers. This guidance applies to the
new health insurer fee enacted in the Patient Protection and Affordable Care Act and the Health Care and Education
Reconciliation Act of 2010 (collectively, “Health Care Reform”). This new accounting guidance results in the
recognition of the expense associated with the fee on a straight-line basis beginning in 2014. The health insurer fee
will be recorded within operating expenses, and we project that our expense for this fee in 2014 will range from
$575 million to $625 million. This fee will not be tax deductible.
Amendments to the Scope, Measurement and Disclosure Requirements of Investment Companies
Effective January 1, 2014, we will adopt new accounting guidance relating to the approach for determining whether
an entity is considered an investment company for accounting purposes. This guidance clarifies the characteristics
and sets measurement and disclosure requirements for an investment company for accounting purposes. Early
adoption of this guidance is permitted and is not expected to have an impact on our financial position or operating
results.
Accounting for Investments in Qualified Affordable Housing Projects
Effective January 1, 2015, we will be permitted to make an accounting policy election whether to adopt new
accounting guidance relating to the recognition of amortization of investments in qualified affordable housing
projects. The guidance sets forth a new method of measurement, referred to as the proportional amortization
method, under which income and expense items related to qualified affordable housing projects would be allocated
to the income taxes line item. The adoption of this new guidance is not expected to have a material impact on our
financial position or operating results.
Use of Estimates
The preparation of the accompanying consolidated financial statements in conformity with GAAP requires the use
of estimates and assumptions that affect the amounts reported in these consolidated financial statements and notes.
We consider the following accounting estimates critical in the preparation of the accompanying consolidated
financial statements: health care costs payable, other insurance liabilities, recoverability of goodwill and other
acquired intangible assets, measurement of defined benefit pension and other postretirement benefit plans, other-
than-temporary impairment of debt securities and revenue recognition, and allowance for estimated terminations