Ameriprise 2009 Annual Report Download - page 123

taken in a tax return. The standard also provides guidance on derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. The Company adopted the standard as of January 1, 2007 and recorded a cumulative change in
accounting principle resulting in an increase in the liability for unrecognized tax benefits and a decrease in beginning retained earnings of
$4 million.
DAC Costs in Connection With Modifications or Exchanges of Insurance Contracts
In September 2005, the accounting standards related to DAC in connection with modifications or exchanges of insurance contracts were
updated. The standard provides clarifying guidance on accounting for DAC associated with an insurance or annuity contract that is
significantly modified or is internally replaced with another contract. Prior to adoption, the Company accounted for many of these
transactions as contract continuations and continued amortizing existing DAC against revenue for the new or modified contract. Effective
January 1, 2007, the Company adopted the standard resulting in these transactions being prospectively accounted for as contract
terminations. Consistent with this, the Company now anticipates these transactions in establishing amortization periods and other
valuation assumptions. As a result of adopting the standard, the Company recorded as a cumulative change in accounting principle
$206 million, reducing DAC by $204 million, DSIC by $11 million and liabilities for future policy benefits by $9 million. The after-tax
decrease to retained earnings for these changes was $134 million.
Future Adoption of New Accounting Standards
Fair Value
In January 2010, the FASB updated the accounting standards related to disclosure about fair value measurements. The standard expands
the current disclosure requirements to include additional detail about significant transfers between Levels 1 and 2 within the fair value
hierarchy and presenting activity in the rollforward of Level 3 activity on a gross basis. The standard also clarifies existing disclosure
requirements related to the level of disaggregation to be used for assets and liabilities as well as disclosures about the inputs and valuation
techniques used to measure fair value. The standard is effective for interim and annual reporting periods beginning after December 15,
2009, except for the disclosure requirements related to the Level 3 rollforward, which are effective for interim and annual periods
beginning after December 15, 2010. The Company will adopt the standard in the first quarter of 2010 except for the additional disclosures
related to the Level 3 rollforward, which the Company will adopt in the first quarter of 2011. The adoption of the standard will not impact
the Company’s consolidated results of operations and financial condition.
Consolidation of Variable Interest Entities
In June 2009, the FASB updated the accounting standards related to the consolidation of variable interest entities. The standard amends
current consolidation guidance and requires additional disclosures about an enterprise’s involvement in VIEs. The standard is effective
for interim and annual reporting periods beginning after November 15, 2009, with early adoption prohibited. The Company manages
$6.4 billion collateralized debt obligation entities that may be consolidated as a result of adopting the standard. The Company is in the
process of evaluating whether any of these entities will be consolidated in the first quarter of 2010. The Company is also assessing the
impacts consolidation would have on the Consolidated Balance Sheets and the Consolidated Results of Operations.
4. Separation and Distribution from American Express
Ameriprise Financial was formerly a wholly owned subsidiary of American Express Company (‘‘American Express’’). On February 1,
2005, the American Express Board of Directors announced its intention to pursue the disposition of 100% of its shareholdings in
Ameriprise Financial (the ‘‘Separation’’) through a tax-free distribution to American Express shareholders. Effective as of the close of
business on September 30, 2005, American Express completed the separation of Ameriprise Financial and the distribution of the
Ameriprise Financial common shares to American Express shareholders (the ‘‘Distribution’’).
American Express historically provided a variety of corporate and other support services for the Company, including information
technology, treasury, accounting, financial reporting, tax administration, human resources, marketing, legal and other services.
Following the Distribution, American Express provided the Company with many of these services pursuant to transition services
agreements for transition periods of up to two years or more, if extended by mutual agreement of the Company and American Express.
The Company terminated all of these service agreements and completed its separation from American Express in 2007.
108 ANNUAL REPORT 2009