Ameriprise 2009 Annual Report Download - page 60

allowance with respect to such assets. In the opinion of management, it is currently more likely than not that we will realize the benefit of
our deferred tax assets, including our capital loss deferred tax asset; therefore, no such valuation allowance has been established.
Recent Accounting Pronouncements
For information regarding recent accounting pronouncements and their expected impact on our future consolidated results of operations
or financial condition, see Note 3 to our Consolidated Financial Statements.
Sources of Revenues and Expenses
Management and Financial Advice Fees
Management and financial advice fees relate primarily to fees earned from managing mutual funds, separate account and wrap account
assets, institutional investments, including structured investments, as well as fees earned from providing financial advice and
administrative services (including transfer agent, administration and custodial fees earned from providing services to retail mutual
funds). Management and financial advice fees also include mortality and expense risk fees earned on separate account assets.
Our management fees are generally accrued daily and collected monthly. A significant portion of our management fees are calculated as a
percentage of the fair value of our managed assets. The substantial majority of our managed assets are valued by independent pricing
services vendors based upon observable market data. The selection of our pricing services vendors and the reliability of their prices are
subject to certain governance procedures, such as periodic comparison across pricing vendors, due diligence reviews, daily price variance
analysis, subsequent sales testing, stale price review, pricing vendor challenge process, and valuation committee oversight.
Many of our mutual funds have a performance incentive adjustment (‘‘PIA’’). The PIA increases or decreases the level of management fees
received based on the specific fund’s relative performance as measured against a designated external index. We may also receive
performance-based incentive fees from hedge funds or other structured investments that we manage. We recognize PIA revenue monthly
on a 12 month rolling performance basis. The monthly PIA and annual performance fees for structured investments are recognized as
revenue at the time the performance fee is finalized or no longer subject to adjustment. The PIA is finalized on a monthly basis. All other
performance fees are based on a full contract year and are final at the end of the contract year. Any performance fees received are not
subject to repayment or any other clawback provisions and approximately 1% of managed assets as of December 31, 2009 are subject to
‘‘high water marks’’ whereby we will not earn incentive fees even if the fund has positive returns until it surpasses the previous high water
mark. Employee benefit plan and institutional investment management and administration services fees are negotiated and are also
generally based on underlying asset values. Fees from financial planning and advice services are recognized when the financial plan is
delivered.
Distribution Fees
Distribution fees primarily include point-of-sale fees (such as mutual fund front-end sales loads) and asset-based fees (such as 12b-1
distribution and shareholder service fees) that are generally based on a contractual percentage of assets and recognized when earned.
Distribution fees also include amounts received under marketing support arrangements for sales of mutual funds and other companies’
products, such as through our wrap accounts, as well as surrender charges on fixed and variable universal life insurance and annuities.
Net Investment Income
Net investment income primarily includes interest income on fixed maturity securities classified as Available-for-Sale, commercial
mortgage loans, policy loans, consumer loans, other investments and cash and cash equivalents; the changes in fair value of trading
securities, including seed money, and certain derivatives; the pro rata share of net income or loss on equity method investments; and
realized gains and losses on the sale of securities and charges for other-than-temporary impairments of investments related to credit loss.
Interest income is accrued as earned using the effective interest method, which makes an adjustment of the yield for security premiums
and discounts on all performing fixed maturity securities classified as Available-for-Sale, excluding structured securities, and commercial
mortgage loans so that the related security or loan recognizes a constant rate of return on the outstanding balance throughout its term.
For beneficial interests in structured securities, the excess cash flows attributable to a beneficial interest over the initial investment are
recognized as interest income over the life of the beneficial interest using the effective yield method. Realized gains and losses on
securities, other than trading securities and equity method investments, are recognized using the specific identification method on a trade
date basis.
ANNUAL REPORT 2009 45