Ameriprise 2012 Annual Report Download - page 132

a successful contract acquisition, (ii) portions of employees’ compensation and benefits directly related to time spent
performing acquisition activities (that is, underwriting, policy issuance and processing, medical and inspection, and contract
selling) for a contract that has been acquired, (iii) other costs related to acquisition activities that would not have been
incurred had the acquisition of the contract not occurred, and (iv) advertising costs that meet the capitalization criteria in
other GAAP guidance for certain direct-response marketing. All other acquisition related costs are expensed as incurred.
The Company retrospectively adopted the new standard on January 1, 2012. See Note 1 for the effect of the change on
affected financial statement line items for prior periods retrospectively adjusted and Note 2 for the Company’s accounting
policies on DAC.
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
holders, not Ameriprise Financial, ultimately will receive the benefits or absorb the losses associated with the assets and
liabilities of the CDOs. Subsequent to the adoption, the net change in fair value of the assets and liabilities of the CDOs is
recorded as net income attributable to noncontrolling interests and as an adjustment to appropriated retained earnings of
consolidated investment entities. See Note 4 for additional information related to the application of the amended VIE
consolidation model and the required disclosures.
Future Adoption of New Accounting Standards
Comprehensive Income
In February 2013, the FASB updated the accounting standard related to comprehensive income. The update requires
entities to provide information about significant amounts reclassified out of accumulated other comprehensive income. The
standard is effective for interim and annual periods beginning after December 15, 2012 and is required to be applied
prospectively. The adoption of the standard will not impact the Company’s consolidated results of operations and financial
condition.
Balance Sheet
In December 2011, the FASB updated the accounting standards to require new disclosures about offsetting assets and
liabilities. The standard requires an entity to disclose both gross and net information about certain financial instruments
and transactions subject to master netting arrangements (or similar agreements) or eligible for offset in the statement of
financial position. The standard is effective for interim and annual periods beginning on or after January 1, 2013 on a
retrospective basis. The adoption of the standard is not expected to impact the Company’s consolidated results of
operations and financial condition.
4. Consolidated Investment Entities
The Company provides asset management services to various CDOs and other investment products (collectively,
‘‘investment entities’’), which are sponsored by the Company. Certain of these investment entities are considered to be
VIEs while others are considered to be voting rights entities (‘‘VREs’’). The Company consolidates certain of these
investment entities.
The CDOs managed by the Company are considered VIEs. These CDOs are asset backed financing entities collateralized by
a pool of assets, primarily syndicated loans and, to a lesser extent, high-yield bonds. Multiple tranches of debt securities
are issued by a CDO, offering investors various maturity and credit risk characteristics. The debt securities issued by the
CDOs are non-recourse to the Company. The CDO’s debt holders have recourse only to the assets of the CDO. The assets
of the CDOs cannot be used by the Company. Scheduled debt payments are based on the performance of the CDO’s
collateral pool. The Company generally earns management fees from the CDOs based on the par value of outstanding debt
and, in certain instances, may also receive performance-based fees. In the normal course of business, the Company has
invested in certain CDOs, generally an insignificant portion of the unrated, junior subordinated debt.
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