Allstate 2008 Annual Report Download - page 252

Adopted accounting standards
Securities and Exchange Commission (‘‘SEC’’) Staff Accounting Bulletin No. 109, Written Loan Commitments That are
Recorded At Fair Value Through Earnings (‘‘SAB 109’’)
In October 2007, the SEC issued SAB 109, a replacement of SAB 105, ‘‘Application of Accounting Principles
to Loan Commitments’’. SAB 109 is applicable to both loan commitments accounted for under SFAS No. 133,
‘‘Accounting for Derivative Instruments and Hedging Activities’’ (‘‘SFAS No. 133’’), and other loan commitments for
which the issuer elects fair value accounting under SFAS No. 159, ‘‘The Fair Value Option for Financial Assets and
Financial Liabilities’’. SAB 109 states that the expected net future cash flows related to the servicing of a loan
should be included in the fair value measurement of a loan commitment accounted for at fair value through
earnings. The expected net future cash flows associated with loan servicing should be determined in accordance
with the guidance in SFAS No. 140, ‘‘Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities’’, as amended by SFAS No. 156, ‘‘Accounting for Servicing of Financial Assets’’.
SAB 109 should be applied on a prospective basis to loan commitments accounted for under SFAS No. 133 that
were issued or modified in fiscal quarters beginning after December 15, 2007. Earlier adoption was not permitted.
The adoption of SAB 109 did not have a material impact on the Company’s results of operations or financial
position.
SFAS No. 157, Fair Value Measurements (‘‘SFAS No. 157’’)
In September 2006, the Financial Accounting Standards Board (‘‘FASB’’) issued SFAS No. 157, which
redefines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date, establishes a framework for measuring fair
value in GAAP, and expands disclosures about fair value measurements. SFAS No. 157 establishes a three-level
hierarchy for fair value measurements based upon the nature of the inputs to the valuation of an asset or liability.
SFAS No. 157 applies where other accounting pronouncements require or permit fair value measurements. In
February 2008, the FASB issued FASB Staff Position No. 157-2, ‘‘Effective Date of FASB Statement No. 157’’ (‘‘FSP
FAS 157-2’’), which permits the deferral of the effective date of SFAS No. 157 to fiscal years beginning after
November 15, 2008 for all non-financial assets and liabilities, except those that are recognized or disclosed at fair
value in the financial statements on a recurring basis. The Company adopted the provisions of SFAS No. 157 for
financial assets and financial liabilities recognized or disclosed at fair value on a recurring or non-recurring basis
as of January 1, 2008. Consistent with the provisions of FSP FAS 157-2, the Company decided to defer the
adoption of SFAS No. 157 for non-financial assets and liabilities measured at fair value on a non-recurring basis
until January 1, 2009. In October 2008, the FASB issued FASB Staff Position No. FAS 157-3, ‘‘Determining the Fair
Value of a Financial Asset When the Market for That Asset Is Not Active’’ (‘‘FSP FAS 157-3’’), which clarifies the
application of SFAS 157 in a market that is not active. The Company adopted the provisions of FSP FAS 157-3 as
of September 30, 2008. The adoption of SFAS No. 157 and FSP FAS 157-3 did not have a material effect on the
Company’s results of operations or financial position (see Note 6).
SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB
Statement No. 115 (‘‘SFAS No. 159’’)
In February 2007, the FASB issued SFAS No. 159 which provides reporting entities, on an ongoing basis, an
option to report selected financial assets, including investment securities, and financial liabilities, including most
insurance contracts, at fair value through earnings. SFAS No. 159 establishes presentation and disclosure
requirements designed to facilitate comparisons between companies that choose different measurement
alternatives for similar types of financial assets and liabilities. The standard also requires additional information to
aid financial statement users’ understanding of the impacts of a reporting entity’s decision to use fair value on its
earnings and requires entities to display, on the face of the statement of financial position, the fair value of those
assets and liabilities for which the reporting entity has chosen to measure at fair value. SFAS No. 159 was
effective as of the beginning of a reporting entity’s first fiscal year beginning after November 15, 2007. The
Company did not apply the fair value option to any existing financial assets or liabilities as of January 1, 2008 and
did not elect to apply the option prospectively to any financial assets or liabilities acquired during 2008.
Consequently, the adoption of SFAS No. 159 had no impact on the Company’s results of operations or financial
position.
FASB Staff Position No. FIN 39-1, Amendment of FASB Interpretation No. 39 (‘‘FSP FIN 39-1’’)
In April 2007, the FASB issued FSP FIN 39-1, which amends FASB Interpretation No. 39, ‘‘Offsetting of
Amounts Related to Certain Contracts’’. FSP FIN 39-1 replaces the terms ‘‘conditional contracts’’ and ‘‘exchange
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Notes