Ameriprise 2013 Annual Report Download - page 123

lending that negatively impacted its tax position. Management determined that the effect of these corrections was not
material to current and previously issued financial statements.
The Company evaluated events or transactions that may have occurred after the balance sheet date for potential
recognition or disclosure through the date the financial statements were issued.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The Company consolidates entities in which it holds a greater than 50% voting interest, or when certain conditions are met
for VIEs and limited partnerships. Entities in which the Company exercises significant influence or holds a greater than 20%
but less than 50% voting interest are accounted for under the equity method. All other investments that are not reported
at fair value as trading or Available-for-Sale securities are accounted for under the cost method where the Company owns
less than a 20% voting interest and does not exercise significant influence.
A VIE is an entity that either has equity investors that lack certain essential characteristics of a controlling financial interest
(including substantive voting rights, the obligation to absorb the entity’s losses, or the rights to receive the entity’s returns)
or has equity investors that do not provide sufficient financial resources for the entity to support its activities. A VIE is
required to be assessed for consolidation under two models:
• If the VIE is a money market fund or is an investment company, or has the financial characteristics of an investment
company, and the following is true:
(i) the entity does not have an explicit or implicit obligation to fund the investment company’s losses; and
(ii) the investment company is not a securitization entity, asset backed financing entity, or an entity previously
considered a qualifying special purpose entity,
then, the VIE will be consolidated by the entity that determines it stands to absorb a majority of the VIE’s expected
losses or to receive a majority of the VIE’s expected residual returns. Examples of entities that are likely to be
assessed for consolidation under this framework include hedge funds, property funds, private equity funds and venture
capital funds.
• If the VIE does not meet the criteria above, the VIE will be consolidated by the entity that determines it has both:
(i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance; and
(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 period. 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 period.
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
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