Ameriprise 2011 Annual Report Download - page 129

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, 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 premiums and
discounts on all performing fixed maturity securities classified as Available-for-Sale so that the related security or loan
recognizes a constant rate of return on the outstanding balance throughout its term. 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.
Premiums
Premiums include premiums on property-casualty insurance, traditional life and health (DI and LTC) insurance and
immediate annuities with a life contingent feature. Premiums on auto and home insurance are net of reinsurance
premiums and are recognized ratably over the coverage period. Premiums on traditional life and health insurance are net
of reinsurance ceded and are recognized as revenue when due.
3. Recent Accounting Pronouncements
Adoption of New Accounting Standards
Receivables
In April 2011, the Financial Accounting Standards Board (‘‘FASB’’) updated the accounting standards for troubled debt
restructurings. The new standard includes indicators that a lender should consider in determining whether a borrower is
experiencing financial difficulties and provides clarification for determining whether the lender has granted a concession to
the borrower. The standard sets the effective dates for troubled debt restructuring disclosures required by recent guidance
on credit quality disclosures. The standard is effective for interim and annual periods beginning on or after June 15, 2011,
and is to be applied retrospectively to modifications occurring on or after the beginning of the annual period of adoption.
For purposes of measuring impairments of receivables that are considered impaired as a result of applying the new
guidance, the standard should be applied prospectively for the interim or annual period beginning on or after June 15,
2011. The Company adopted the standard in the third quarter of 2011. The adoption did not have any effect on the
Company’s consolidated results of operations and financial condition. See Note 6 for the required disclosures.
Fair Value
In January 2010, the FASB updated the accounting standards related to disclosures on 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 presents 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 on 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 adopted the standard in the first quarter of 2010, except for the additional disclosures
related to the Level 3 rollforward, which the Company adopted in the first quarter of 2011. The adoption did not have any
effect on the Company’s consolidated results of operations and financial condition. See Note 4 and Note 14 for the
required disclosures.
Consolidation of Variable Interest Entities
In June 2009, the FASB updated the accounting standards related to the consolidation of VIEs. The standard amends the
guidance on the determination of the primary beneficiary of a VIE from a quantitative model to a qualitative model and
requires additional disclosures about an enterprise’s involvement in VIEs. Under the new qualitative model, the primary
beneficiary must have both the power to direct the activities of the VIE and the obligation to absorb losses or the right to
receive gains that could be potentially significant to the VIE. In February 2010, the FASB amended this guidance to defer
application of the consolidation requirements for certain investment funds. The standards are effective for interim and
annual reporting periods beginning after November 15, 2009. The Company adopted the standards effective January 1,
2010 and as a result consolidated certain collateralized debt obligations (‘‘CDOs’’). At adoption, the Company recorded a
$5.5 billion increase to assets and a $5.1 billion increase to liabilities. The difference between the fair value of the assets
and liabilities of the CDOs was recorded as a cumulative effect increase of $473 million to appropriated retained earnings
of consolidated investment entities. Such amounts are recorded as appropriated retained earnings as the CDO note
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