Ameriprise 2013 Annual Report Download - page 138

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assumptions, if any, employed in the valuation methodology. The Company also considers the results of its exception
reporting controls and any resulting price challenges that arise.
See Note 14 for a description of the Company’s determination of the fair value of corporate debt securities, U.S.
government and agencies obligations, common stocks and other investments.
Receivables
For receivables of the consolidated CDOs, the carrying value approximates fair value as the nature of these assets has
historically been short term and the receivables have been collectible. The fair value of these receivables is classified as
Level 2.
Other Assets
Other assets consist primarily of properties held in consolidated pooled investment vehicles managed by Threadneedle. The
fair value of these properties is calculated by a third party appraisal service by discounting future cash flows generated by
the expected market rental value for the property using the equivalent yield of a similar investment property. Inputs used in
determining the equivalent yield and expected rental value of the property may include: rental cash flows, current
occupancy, historical vacancy rates, tenant history and assumptions regarding how quickly the property can be occupied
and at what rental rates. Management reviews the valuation report and assumptions used to ensure that the valuation was
performed in accordance with applicable independence, appraisal and valuation standards. Given the significance of the
unobservable inputs to these measurements, these assets are classified as Level 3.
Other assets of the consolidated CDO’s consist primarily of warrants. Warrants that are traded directly with the issuer are
classified as Level 2 when the price is derived from observable market data. Warrants from an issuer whose securities are
not priced in active markets are classified as Level 3.
Liabilities
Debt
The fair value of the CDOs’ debt is determined using a discounted cash flow model. Inputs used to determine the expected
cash flows include assumptions about default, discount, prepayment and recovery rates of the CDOs’ underlying assets.
Given the significance of the unobservable inputs to this fair value measurement, the fair value of the CDOs’ debt is
classified as Level 3.
Other Liabilities
Other liabilities consist primarily of securities purchased but not yet settled held by consolidated CDOs. The carrying value
approximates fair value as the nature of these liabilities has historically been short term. The fair value of these liabilities is
classified as Level 2.
Fair Value Option
The Company has elected the fair value option for the financial assets and liabilities of the consolidated CDOs.
Management believes that the use of the fair value option better matches the changes in fair value of assets and liabilities
related to the CDOs.
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