Ameriprise 2011 Annual Report Download - page 123

Statements of Operations. Separate account assets are recorded at fair value. Changes in the fair value of separate
account assets are offset by changes in the related separate account liabilities. The Company receives investment
management fees, mortality and expense risk fees, guarantee fees and cost of insurance charges from the related
accounts.
Included in separate account liabilities are investment liabilities of Threadneedle which represent the value of the units in
issue of the pooled pension funds that are offered by Threadneedle’s subsidiary, Threadneedle Pensions Limited.
Restricted and Segregated Cash and Investments
Total restricted cash at December 31, 2011 and 2010 was $79 million and $110 million, respectively, which cannot be
utilized for operations. The Company’s restricted cash at December 31, 2011 and 2010 was primarily cash held by
Threadneedle for the benefit of customers and cash that has been pledged to counterparties. At both December 31, 2011
and 2010, amounts segregated under federal and other regulations were $1.7 billion, segregated in special reserve bank
accounts for the exclusive benefit of the Company’s brokerage customers.
Land, Buildings, Equipment and Software
Land, buildings, equipment and internally developed or purchased software are carried at cost less accumulated
depreciation or amortization and are reflected within other assets. The Company generally uses the straight-line method of
depreciation and amortization over periods ranging from three to 30 years. At December 31, 2011 and 2010, land,
buildings, equipment and software were $774 million and $693 million, respectively, net of accumulated depreciation of
$1.1 billion at both periods. Depreciation and amortization expense for the years ended December 31, 2011, 2010 and
2009 was $143 million, $160 million and $176 million, respectively.
Goodwill and Other Intangible Assets
Goodwill represents the amount of an acquired company’s acquisition cost in excess of the fair value of assets acquired
and liabilities assumed. The Company evaluates goodwill for impairment annually on the measurement date of July 1 and
whenever events and circumstances indicate that an impairment may have occurred, such as a significant adverse change
in the business climate or a decision to sell or dispose of a reporting unit. In determining whether impairment has
occurred, the Company uses the discounted cash flow method, a variation of the income approach.
Intangible assets are amortized over their estimated useful lives unless they are deemed to have indefinite useful lives. The
Company evaluates the definite lived intangible assets remaining useful lives annually and tests for impairment whenever
events and circumstances indicate that an impairment may have occurred, such as a significant adverse change in the
business climate. For definite lived intangible assets subject to amortization, impairment to fair value is recognized if the
carrying amount is not recoverable. Indefinite lived intangibles are also tested for impairment annually or whenever
circumstances indicate an impairment may have occurred. Impairment is recognized by the amount carrying value exceeds
fair value.
Goodwill and other intangible assets are reflected in other assets.
Derivative Instruments and Hedging Activities
Freestanding derivative instruments are recorded at fair value and are reflected in other assets or other liabilities. The
Company’s policy is to not offset fair value amounts recognized for derivatives and collateral arrangements executed with
the same counterparty under the same master netting arrangement. The accounting for changes in the fair value of a
derivative instrument depends on its intended use and the resulting hedge designation, if any. The Company primarily uses
derivatives as economic hedges that are not designated as accounting hedges or do not qualify for hedge accounting
treatment. The Company occasionally designates derivatives as (i) hedges of changes in the fair value of assets, liabilities,
or firm commitments (‘‘fair value hedges’’), (ii) hedges of a forecasted transaction or of the variability of cash flows to be
received or paid related to a recognized asset or liability (‘‘cash flow hedges’’), or (iii) hedges of foreign currency exposures
of net investments in foreign operations (‘‘net investment hedges in foreign operations’’).
Derivative instruments that are entered into for hedging purposes are designated as such at the time the Company enters
into the contract. For all derivative instruments that are designated for hedging activities, the Company formally documents
all of the hedging relationships between the hedge instruments and the hedged items at the inception of the relationships.
Management also formally documents its risk management objectives and strategies for entering into the hedge
transactions. The Company formally assesses, at inception and on a quarterly basis, whether derivatives designated as
hedges are highly effective in offsetting the fair value or cash flows of hedged items. If it is determined that a derivative is
no longer highly effective as a hedge, the Company will discontinue the application of hedge accounting.
For derivative instruments that do not qualify for hedge accounting or are not designated as accounting hedges, changes in
fair value are recognized in current period earnings. Changes in fair value of derivatives are presented in the Consolidated
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