Ameriprise 2010 Annual Report Download - page 63

law, capital losses generally must be used against capital gain income within five years of the year in which the capital
losses are recognized for tax purposes.
We are required to establish a valuation allowance for any portion of our deferred tax assets that management believes will
not be realized. Significant judgment is required in determining if a valuation allowance should be established, and the
amount of such allowance if required. Factors used in making this determination include estimates relating to the
performance of the business including the ability to generate capital gains. Consideration is given to, among other things in
making this determination, (i) future taxable income exclusive of reversing temporary differences and carryforwards,
(ii) future reversals of existing taxable temporary differences, (iii) taxable income in prior carryback years, and (iv) tax
planning strategies. Management may need to identify and implement appropriate planning strategies to ensure our ability
to realize our deferred tax assets and avoid the establishment of a valuation 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 and 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 and institutional 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.
Several 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 expect that the PIA earned by our mutual funds will be discontinued during 2011. 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, 2010 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, certain derivatives and certain assets and liabilities of consolidated
investment entities; 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 losses. Interest
income is accrued as earned using the effective interest method, which makes an adjustment of the yield for security
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