Ameriprise 2014 Annual Report Download - page 124

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. Entities that are assessed for consolidation under
this framework include hedge funds, property funds (pooled investment vehicles), private equity funds and venture
capital funds.
When determining whether the Company will absorb the majority of a VIE’s expected losses or receive a majority of a
VIE’s expected returns, it analyzes the purpose and design of the VIE and identifies the variable interests it holds
including those of related parties and de facto agents of the Company. The Company then quantitatively determines
whether its variable interests will absorb a majority of the VIE’s expected losses or residual returns. If the Company will
absorb the majority of the VIE’s expected losses or residual returns, the Company consolidates the VIE.
• If the VIE does not meet the criteria above, then the VIE will be consolidated by the reporting 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.
Entities that are assessed for consolidation under this framework include asset-backed financing entities such as
collateralized loan obligations (‘‘CLOs’’) and investments in qualified affordable housing partnerships.
When evaluating entities for consolidation under this framework, the Company considers its contractual rights in
determining whether it has the power to direct the activities of the VIE that most significantly impact the VIEs economic
performance. In determining whether the Company has this power, it considers whether it is acting as an asset manager
enabling it to direct the activities that most significantly impact the economic performance of an entity or if it is acting in a
more passive role such as a limited partner without substantive rights to impact the economic performance of the entity.
In determining whether the Company has the obligation to absorb losses of the VIE or the right to receive benefits from the
VIE that could potentially be significant to the VIE, the Company considers an analysis of its rights to receive benefits such
as management and incentive fees and investment returns and its obligation to absorb losses associated with any
investment in the VIE in conjunction with other qualitative factors.
If the Company consolidates a VIE under either accounting model, it is referred to as the VIE’s primary beneficiary.
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. Revenues and expenses are translated at daily exchange
rates during the period. The resulting translation adjustment, along with any related hedge and tax effects, are included in
accumulated other comprehensive income (‘‘AOCI’’).
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
and recognition of other-than-temporary impairments, deferred acquisition costs (‘‘DAC’’) and the corresponding recognition
of DAC amortization, valuation of derivative instruments and hedging activities, litigation and claims reserves and income
taxes and the recognition of deferred tax assets and liabilities. These accounting estimates reflect the best judgment of
management and actual results could differ.
Cash and Cash Equivalents
Cash equivalents include time deposits and other highly liquid investments with original maturities of 90 days or less.
Investments
Available-for-Sale Securities
Available-for-Sale securities are carried at fair value with unrealized gains (losses) recorded in AOCI, net of impacts to DAC,
deferred sales inducement costs (‘‘DSIC’’), unearned revenue, benefit reserves, reinsurance recoverables and income
taxes. Gains and losses are recognized on a trade date basis in the Consolidated Statements of Operations upon
disposition of the securities.
When the fair value of an investment is less than its amortized cost, the Company assesses whether or not: (i) it has the
intent to sell the security (made a decision to sell) or (ii) it is more likely than not that the Company will be required to sell
105