Ameriprise 2012 Annual Report Download - page 131

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 the Company’s 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,
mortgage loans, policy and certificate loans, other investments, cash and cash equivalents and investments of
consolidated investment entities; 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
Comprehensive Income
In June 2011, the Financial Accounting Standards Board (‘‘FASB’’) updated the accounting standards related to the
presentation of comprehensive income. The standard requires entities to present all nonowner changes in stockholders’
equity either in a single continuous statement of comprehensive income or in two separate but consecutive statements.
The amendments do not affect how earnings per share is calculated or presented. The standard is effective for interim and
annual periods beginning after December 15, 2011. The Company retrospectively adopted the standard in the first quarter
of 2012. The adoption of the standard did not have any effect on the Company’s consolidated results of operations and
financial condition.
Fair Value
In May 2011, the FASB updated the accounting standards related to fair value measurement and disclosure requirements.
The standard requires entities, for assets and liabilities measured at fair value in the statement of financial position which
are Level 3 fair value measurements, to disclose quantitative information about unobservable inputs and assumptions used
in the measurements, a description of the valuation processes in place, and a qualitative discussion about the sensitivity
of the measurements to changes in unobservable inputs and interrelationships between those inputs if a change in those
inputs would result in a significantly different fair value measurement. In addition, the standard requires disclosure of fair
value by level within the fair value hierarchy for each class of assets and liabilities not measured at fair value in the
statement of financial position but for which the fair value is disclosed. The standard is effective for interim and annual
periods beginning on or after December 15, 2011. The Company adopted the standard in the first quarter of 2012. The
adoption of the standard 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.
Transfers and Servicing: Reconsideration of Effective Control for Repurchase Agreements
In April 2011, the FASB updated the accounting standards related to accounting for repurchase agreements and other
similar agreements. The standard modifies the criteria for determining when these transactions would be accounted for as
secured borrowings as opposed to sales. The standard is effective prospectively for new transfers and existing transactions
that are modified in the first interim or annual period beginning on or after December 15, 2011. The Company adopted
the standard in the first quarter of 2012. The adoption of the standard did not have any effect on the Company’s
consolidated results of operations and financial condition.
Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts
In October 2010, the FASB updated the accounting standard for DAC. Under this new standard, only the following costs
incurred in the acquisition of new and renewal insurance contracts are capitalizable as DAC: (i) incremental direct costs of
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