Ameriprise 2012 Annual Report Download - page 68

We adopted new accounting rules for DAC on January 1, 2012 on a retrospective basis. See Note 1 to our Consolidated
Financial Statements for the impact of the adoption on prior period results of operations and financial condition.
Sources of Revenues and Expenses
Management and Financial Advice Fees
Management and financial advice fees relate primarily to fees earned from managing mutual funds, separate account and
wrap account assets and institutional investments, as well as fees earned from providing financial advice and
administrative services (including transfer agent, administration and custodial fees earned from providing services to retail
mutual funds). Management and financial advice fees also include mortality and expense risk fees earned on separate
account assets.
Our management fees are generally accrued daily and collected monthly. A significant portion of our management fees are
calculated as a percentage of the fair value of our managed assets. The substantial majority of our managed assets are
valued by third party pricing services vendors based upon observable market data. The selection of our third party pricing
services vendors and the reliability of their prices are subject to certain governance procedures, such as exception
reporting, subsequent transaction testing, and annual due diligence of our vendors, which includes assessing the vendor’s
valuation qualifications, control environment, analysis of asset-class specific valuation methodologies and understanding of
sources of market observable assumptions.
We may receive performance-based incentive fees from hedge funds, Threadneedle OEICs, or other structured investments
that we manage. The annual performance fees for structured investments are recognized as revenue at the time the
performance fee is finalized or no longer subject to adjustment. All other performance fees are based on a full contract
year and are final at the end of the contract year. Any performance fees received are not subject to repayment or any
other clawback provisions.
Employee benefit plan and institutional investment management and administration services fees are negotiated and are
generally based on underlying asset values. Fees from financial planning and advice services are recognized when the
financial plan is delivered.
Distribution Fees
Distribution fees primarily include point-of-sale fees (such as mutual fund front-end sales loads) and asset-based fees
(such as 12b-1 distribution and shareholder service fees) that are generally based on a contractual percentage of assets
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 our 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 CIEs; the
changes in fair value of trading securities, certain derivatives and certain assets and liabilities of CIEs; 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 and commercial mortgage loans 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 (disability income and long term
care) 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.
Other Revenues
Other revenues include certain charges assessed on fixed and variable universal life insurance and annuities, which consist
of cost of insurance charges, net of reinsurance premiums and cost of reinsurance for UL insurance products, variable
annuity guaranteed benefit rider charges and administration charges against contractholder accounts or balances.
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