Ameriprise 2010 Annual Report Download - page 115

Notes to Consolidated Financial Statements
1. Basis of Presentation
Ameriprise Financial, Inc. is a holding company, which primarily conducts business through its subsidiaries to provide
financial planning, products and services that are designed to be utilized as solutions for clients’ cash and liquidity, asset
accumulation, income, protection and estate and wealth transfer needs. The foreign operations of Ameriprise Financial,
Inc. are conducted through its subsidiary, Threadneedle Asset Management Holdings S` arl (‘‘Threadneedle’’).
The accompanying Consolidated Financial Statements include the accounts of Ameriprise Financial, Inc., companies in
which it directly or indirectly has a controlling financial interest and variable interest entities (‘‘VIEs’’) in which it is the
primary beneficiary (collectively, the ‘‘Company’’). The income or loss generated by consolidated entities which will not be
realized by the Company’s shareholders is attributed to noncontrolling interests in the Consolidated Statements of
Operations. Noncontrolling interests are the ownership interests in subsidiaries not attributable, directly or indirectly, to
Ameriprise Financial, Inc. and are classified as equity within the Consolidated Balance Sheets. The Company excluding
noncontrolling interests is defined as Ameriprise Financial. All material intercompany transactions and balances have been
eliminated in consolidation. See Note 2 and Note 4 for additional information related to VIEs.
In the third quarter of 2010, the Company made adjustments for revisions to the valuations of reserves, deferred
acquisition costs (‘‘DAC’’) and deferred sales inducement costs (‘‘DSIC’’) related to insurance and living benefit guarantees
which resulted in a $32 million pretax charge ($21 million after-tax). In the second quarter of 2010, the Company made
an adjustment for revisions to certain calculations in its valuation of DAC and DSIC which resulted in a $33 million pretax
benefit ($21 million after-tax).
In the second quarter of 2010, the Company purchased an additional $6 million ownership interest in Cofunds, a leading
investment platform that provides distribution access to over 1,500 funds from over 90 UK fund managers. This additional
investment increased the Company’s ownership percentage from 16% to greater than 20%, and as a result, the Company
adopted the equity method of accounting and recorded a retrospective adjustment to the investment balance, results of
operations and retained earnings as if the equity method had been in effect during all previous periods in which the
investment was held. The effect of the change to the Company’s prior period consolidated results of operations and
financial condition was not material.
The accompanying Consolidated Financial Statements are prepared in accordance with U.S. generally accepted accounting
principles (‘‘GAAP’’). Certain reclassifications of prior period amounts have been made to conform to the current
presentation.
The Company evaluated events or transactions that may have occurred after the balance sheet date for potential
recognition or disclosure through the date the financial statements were issued.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The Company consolidates entities in which it holds a greater than 50% voting interest, or when certain conditions are met
for VIEs and limited partnerships. Entities in which the Company exercises significant influence or holds a greater than 20%
but less than 50% voting interest are accounted for under the equity method. All other investments that are not reported
at fair value as trading or Available-for-Sale securities are accounted for under the cost method where the Company owns
less than a 20% voting interest and does not exercise significant influence.
A VIE is an entity that either has equity investors that lack certain essential characteristics of a controlling financial interest
(including substantive voting rights, the obligation to absorb the entity’s losses, or the rights to receive the entity’s returns)
or has equity investors that do not provide sufficient financial resources for the entity to support its activities. A VIE is
required to be assessed for consolidation under two models:
• If the VIE is a money market fund or is an investment company, or has the financial characteristics of an investment
company, and the following is true:
(i) the entity does not have an explicit or implicit obligation to fund the investment company’s losses; and
(ii) the investment company is not a securitization entity, asset backed financing entity, or an entity formally
considered a qualifying special purpose entity,
then, the VIE will be consolidated by the entity that determines it stands to absorb a majority of the VIE’s expected
losses or to receive a majority of the VIE’s expected residual returns. Examples of entities that are likely to be
assessed for consolidation under this framework include hedge funds, property funds, private equity funds and venture
capital funds.
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