Ameriprise 2006 Annual Report Download - page 65

Notes to Consolidated Financial Statements
1. Basis of Presentation
The accompanying Consolidated Financial Statements include
the accounts of Ameriprise Financial, Inc. (“Ameriprise
Financial”), companies in which it directly or indirectly has a
controlling financial interest, variable interest entities in which
it is the primary beneficiary and certain limited partnerships
for which it is the general partner (collectively, the “Company”).
Ameriprise Financial is a holding company, which primarily
conducts business through its subsidiaries to provide financial
planning, products and services that are designed to offer
solutions for its clients’ asset accumulation, income manage-
ment and insurance protection needs. The Company’s foreign
operations in the United Kingdom are conducted through its
subsidiary, Threadneedle Asset Management Holdings Limited
(“Threadneedle”). The foreign operations of Threadneedle and
resulting foreign currency translation adjustments have not
been significant to the Company’s consolidated results of
operations and financial condition.
The accompanying Consolidated Financial Statements are
prepared in accordance with U.S. generally accepted accounting
principles (“U.S. GAAP”). Certain reclassifications of prior
period amounts have been made to conform to the current
presentation.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The Company consolidates all entities in which it holds a
greater than 50% voting interest, except for variable interest
entities and limited partnerships which are consolidated when
certain conditions are met and immaterial seed money invest-
ments in mutual and hedge funds, which are accounted for as
trading securities. Entities in which the Company holds a
greater than 20% but less than 50% voting interest are
accounted for under the equity method. Additionally, other
investments in hedge funds in which the Company holds an
interest that is less than 50% are accounted for under the
equity method. All other investments are accounted for under
the cost method where the Company owns less than a 20%
voting interest and does not exercise significant influence, or
as Available-for-Sale or trading securities, as applicable.
The Company also consolidates all variable interest entities
(“VIEs”) for which it is considered to be the primary beneficiary.
The determination as to whether an entity is a VIE is based on
the amount and characteristics of the entity’s equity. The
determination as to whether the Company is considered to be
the primary beneficiary is based on whether the Company will
absorb a majority of the VIE’s expected losses, receive a
majority of the VIE’s expected residual return, or both.
Beginning January 1, 2006, the Company consolidates certain
limited partnerships that are not VIEs, for which the Company
is the general partner and is determined to control the limited
partnership. As a general partner, the Company is presumed to
control the limited partnership unless the limited partners
have the ability to dissolve the partnership or have substantive
participating rights.
All material intercompany transactions and balances between
or among Ameriprise Financial and its subsidiaries and affiliates
have been eliminated in consolidation.
Qualifying Special Purpose Entities (“QSPEs”) are not consoli-
dated. Such QSPEs included a securitization trust containing a
majority of the Company’s rated collateralized debt obligations
(“CDOs”) for which the Company sold all of its retained interests
in 2005. Management evaluates other entities in which the
Company has an interest, is the sponsor or transferor using
control, risk and reward criteria.
Segment Reporting
The Company has two main operating segments: Asset
Accumulation and Income (“AA&I”) and Protection, as well as a
Corporate and Other (“Corporate”) segment. The accounting
policies of the segments are the same as those of the
Company, except for the method of capital allocation and the
accounting for gains (losses) from intercompany revenues and
expenses, which are eliminated in consolidation.
Foreign Currency Translation
Net assets of foreign subsidiaries, whose functional currency
is other than the U.S. dollar, are translated into U.S. dollars
based upon exchange rates prevailing at the end of each year.
The resulting translation adjustment, along with any related
hedge and tax effects, are included in accumulated other
comprehensive income (loss). Revenues and expenses are
translated at the average month-end exchange rates during
the year. Gains and losses related to non-functional currency
transactions, including non-U.S. operations where the functional
currency is the U.S. dollar, are reported net in other revenues
in the Consolidated Statements of Income.
Amounts Based on Estimates and Assumptions
Accounting estimates are an integral part of the Consolidated
Financial Statements. In part, they are based upon assumptions
concerning future events. Among the more significant are those
that relate to investment securities valuation and recognition of
other-than-temporary impairments, valuation of deferred
acquisition costs (“DAC”) and the corresponding recognition
of DAC amortization, derivative financial instruments and
hedging activities, income taxes and recognition of deferred tax
assets and liabilities. These accounting estimates reflect the
best judgment of management and actual results could differ.
Revenues
The Company generates revenue from a wide range of invest-
ment and insurance products. Principal sources of revenue
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Ameriprise Financial, Inc. 2006 Annual Report