Ameriprise 2006 Annual Report Download - page 73

In September 2006, the Securities and Exchange Commission
(“SEC”) issued Staff Accounting Bulletin (“SAB”) No. 108,
“Considering the Effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year Financial
Statements” (“SAB 108”). SAB 108 addresses quantifying the
financial statement effects of misstatements, specifically, how
the effects of prior year uncorrected errors must be considered
in quantifying misstatements in the current year financial
statements. SAB 108 does not change the SEC staff’s
previous positions in SAB No. 99, “Materiality,” regarding
qualitative considerations in assessing the materiality of
misstatements. SAB 108 was effective for fiscal years ending
after November 15, 2006. The effect of adopting SAB 108 on
the Company’s consolidated results of operations and financial
condition was insignificant.
In June 2006, the FASB issued FASB Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes — an interpreta-
tion of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies
the accounting for uncertainty in income taxes recognized in
accordance with FASB Statement No. 109, “Accounting for
Income Taxes.” FIN 48 prescribes a recognition threshold and
measurement attribute for the financial statement recognition
and measurement of a tax position taken or expected to be
taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting
in interim periods, disclosure and transition. The Company
adopted FIN 48 as of January 1, 2007. The effect of adopting
FIN 48 on the Company’s consolidated results of operations
and financial condition was not material.
In February 2006, the FASB issued SFAS No. 155, “Accounting
for Certain Hybrid Financial Instruments” (“SFAS 155”).
SFAS 155 amends SFAS No. 133, “Accounting for Derivative
Instruments and Hedging Activities” (“SFAS 133”) and
SFAS 140, “Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities” (“SFAS 140”).
SFAS 155: (i) permits fair value remeasurement for any hybrid
financial instrument that contains an embedded derivative that
otherwise would require bifurcation; (ii) clarifies which interest-
only and principal-only strips are not subject to the requirements
of SFAS 133; (iii) establishes a requirement to evaluate
interests in securitized financial assets to identify interests
that are freestanding derivatives or that are hybrid financial
instruments that contain an embedded derivative requiring
bifurcation; (iv) clarifies that concentrations of credit risk in the
form of subordination are not embedded derivatives; and
(v) amends SFAS 140 to eliminate the prohibition on a qualifying
special-purpose entity from holding a derivative financial
instrument that pertains to a beneficial interest other than
another derivative financial instrument. The Company adopted
SFAS 155 as of January 1, 2007. The effect of adopting
SFAS 155 on the Company’s results of operations and financial
condition is not expected to be significant.
Effective January 1, 2006, the Company adopted Emerging
Issues Task Force (“EITF”) Issue No. 04-5, “Determining
Whether a General Partner, or the General Partners as a
Group, Controls a Limited Partnership or Similar Entity when
the Limited Partners Have Certain Rights” (“EITF 04-5”).
EITF 04-5 provides guidance on whether a limited partnership
or similar entity that is not a VIE should be consolidated by
one of its partners. EITF 04-5 was effective for general
partners of all new limited partnerships formed and for existing
limited partnerships for which the partnership agreements
were modified after June 29, 2005. For general partners in all
other limited partnerships, this guidance was effective no later
than January 1, 2006. The adoption of EITF 04-5 resulted in
the consolidation of certain limited partnerships for which the
Company is the general partner. The effect of this consolidation
as of January 1, 2006 was a net increase in total assets and
total liabilities of $427 million, consisting of $14 million of
investments (net of $153 million of investments as of
December 31, 2005 previously accounted for under the equity
method), $89 million of restricted cash, $324 million of other
assets, $291 million of other liabilities and $136 million of
non-recourse debt. The adoption of EITF 04-5 had no net effect
on consolidated net income.
Effective January 1, 2006, the Company adopted SFAS No. 154,
“Accounting Changes and Error Corrections,” (“SFAS 154”). This
Statement replaced APB Opinion No. 20, “Accounting Changes,”
and SFAS No. 3, “Reporting Accounting Changes in Interim
Financial Statements,” and changed the requirements for the
accounting for and reporting of a change in accounting principle.
The effect of adopting SFAS 154 on the Company’s consolidated
results of operations and financial condition was insignificant.
Effective January 1, 2006, the Company adopted FASB Staff
Position (“FSP”) FAS 115-1 and FAS 124-1, “The Meaning of
Other-Than-Temporary Impairment and Its Application to
Certain Investments” (“FSP FAS 115-1 and FAS 124-1”).
FSP FAS 115-1 and FAS 124-1 address the determination as
to when an investment is considered impaired, whether that
impairment is other-than-temporary and the measurement of
loss. It also includes accounting considerations subsequent to
the recognition of an other-than-temporary impairment and
requires certain disclosures about unrealized losses that have
not been recognized as other-than-temporary impairments. The
impact of the adoption of FSP FAS 115-1 and FAS 124-1 on
the Company’s consolidated results of operations and financial
condition was not material.
In September 2005, the American Institute of Certified Public
Accountants (“AICPA”) issued Statement of Position (“SOP”) 05-1,
“Accounting by Insurance Enterprises for Deferred Acquisition
Costs in Connection With Modifications or Exchanges of
Insurance Contracts” (“SOP 05-1”). SOP 05-1 provides clarifying
guidance on accounting by insurance enterprises for DAC
associated with any insurance or annuity contract that is internally
replaced with another contract or significantly modified. SOP 05-1
is effective for transactions occurring in fiscal years beginning
after December 15, 2006. The Company has accounted for many
of these transactions as contract continuations and has
continued amortization of existing DAC against revenue from the
new or modified contract. In addition, the Company has not
anticipated these transactions in establishing amortization
periods or other DAC valuation assumptions. Many of these
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Ameriprise Financial, Inc. 2006 Annual Report