Ameriprise 2012 Annual Report Download - page 122

(ii) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive
benefits from the VIE that could potentially be significant to the VIE.
When determining whether the Company stands to absorb the majority of a VIE’s expected losses or receive a majority of a
VIE’s expected returns, it analyzes the design of the VIE to identify the variable interests it holds. Then the Company
quantitatively determines whether its variable interests will absorb a majority of the VIE’s variability. If the Company
determines it has control over the activities that most significantly impact the economic performance of the VIE and it will
absorb a majority of the VIE’s expected variability, the Company consolidates the VIE. The calculation of variability is based
on an analysis of projected probability-weighted cash flows based on the design of the particular VIE. When determining
whether the Company has the power and the obligation to absorb losses or rights to receive benefits from the VIE that
could potentially be significant, the Company qualitatively determines if its variable interests meet these criteria. If the
Company consolidates a VIE under either scenario, it is referred to as the VIE’s primary beneficiary.
The Company consolidates certain limited partnerships that are not VIEs, for which the Company is the general partner and
is determined to control the limited partnership. As a general partner, the Company is presumed to control the limited
partnership unless the limited partners have the ability to dissolve the partnership or have substantive participating rights.
Foreign Currency Translation
Net assets of foreign subsidiaries, whose functional currency is other than the U.S. dollar, are translated into U.S. dollars
based upon exchange rates prevailing at the end of each year. The resulting translation adjustment, along with any related
hedge and tax effects, are included in accumulated other comprehensive income. Revenues and expenses are translated
at average exchange rates during the year.
Amounts Based on Estimates and Assumptions
Accounting estimates are an integral part of the Consolidated Financial Statements. In part, they are based upon
assumptions concerning future events. Among the more significant are those that relate to investment securities valuation
and recognition of other-than-temporary impairments, DAC and the corresponding recognition of DAC amortization,
derivative instruments and hedging activities, litigation and claims reserves and income taxes and the recognition of
deferred tax assets and liabilities. These accounting estimates reflect the best judgment of management and actual results
could differ.
Cash and Cash Equivalents
Cash equivalents include time deposits and other highly liquid investments with original maturities of 90 days or less.
Investments
Available-for-Sale Securities
Available-for-Sale securities are carried at fair value with unrealized gains (losses) recorded in accumulated other
comprehensive income, net of impacts to DAC, DSIC, certain benefit reserves and income taxes. Gains and losses are
recognized in the Consolidated Statements of Operations upon disposition of the securities.
When the fair value of an investment is less than its amortized cost, the Company assesses whether or not: (i) it has the
intent to sell the security (made a decision to sell) or (ii) it is more likely than not that the Company will be required to sell
the security before its anticipated recovery. If either of these conditions is met, an other-than-temporary impairment is
considered to have occurred and the Company must recognize an other-than-temporary impairment for the difference
between the investment’s amortized cost basis and its fair value through earnings. For securities that do not meet the
above criteria and the Company does not expect to recover a security’s amortized cost basis, the security is also
considered other-than-temporarily impaired. For these securities, the Company separates the total impairment into the
credit loss component and the amount of the loss related to other factors. The amount of the total other-than-temporary
impairment related to credit loss is recognized in earnings. The amount of the total other-than-temporary impairment
related to other factors is recognized in other comprehensive income, net of impacts to DAC, DSIC, certain benefit reserves
and income taxes. For Available-for-Sale securities that have recognized an other-than-temporary impairment through
earnings, the difference between the amortized cost basis and the cash flows expected to be collected is accreted as
interest income, if through subsequent evaluation there is a sustained increase in the cash flow expected. Subsequent
increases and decreases in the fair value of Available-for-Sale securities are included in other comprehensive income.
The Company provides a supplemental disclosure on the face of its Consolidated Statements of Operations that presents:
(i) total other-than-temporary impairment losses recognized during the period and (ii) the portion of other-than-temporary
impairment losses recognized in other comprehensive income. The sum of these amounts represents the credit-related
portion of other-than-temporary impairments that were recognized in earnings during the period. The portion of
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