Ameriprise 2014 Annual Report Download - page 132

Where applicable, benefit amounts expected to be recoverable from reinsurance companies who share in the risk are
separately recorded as reinsurance recoverable within receivables.
Auto and Home Reserves
Auto and home reserves include amounts determined from loss reports on individual claims, as well as amounts based on
historical loss experience for losses incurred but not yet reported. Such liabilities are based on estimates. The Company’s
methods for making such estimates and for establishing the resulting liabilities are continually reviewed, and any
adjustments are reflected in earnings in the period such adjustments are made.
Unearned Revenue Liability
The Company’s fixed and variable universal life policies require payment of fees or other policyholder assessments in
advance for services to be provided in future periods. These charges are deferred as unearned revenue and amortized
using estimated gross profits, similar to DAC. The unearned revenue liability is recorded in other liabilities and the
amortization is recorded in other revenues.
Share-Based Compensation
The Company measures and recognizes the cost of share-based awards granted to employees and directors based on the
grant-date fair value of the award and recognizes the expense on a straight-line basis over the vesting period. The fair
value of each option is estimated on the grant date using a Black-Scholes option-pricing model. The Company recognizes
the cost of share-based awards granted to independent contractors and performance share units granted to the
Company’s Executive Leadership Team on a fair value basis until fully vested.
Income Taxes
The Company’s provision for income taxes represents the net amount of income taxes that the Company expects to pay or
to receive from various taxing jurisdictions in connection with its operations. The Company provides for income taxes based
on amounts that the Company believes it will ultimately owe taking into account the recognition and measurement for
uncertain tax positions. Inherent in the provision for income taxes are estimates and judgments regarding the tax treatment
of certain items.
In connection with the provision for income taxes, the Consolidated Financial Statements reflect certain amounts related to
deferred tax assets and liabilities, which result from temporary differences between the assets and liabilities measured for
financial statement purposes versus the assets and liabilities measured for tax return purposes.
The Company is required to establish a valuation allowance for any portion of its deferred tax assets that management
believes will not be realized. Significant judgment is required in determining if a valuation allowance should be established
and the amount of such allowance if required. Factors used in making this determination include estimates relating to the
performance of the business. Consideration is given to, among other things in making this determination: (i) future taxable
income exclusive of reversing temporary differences and carryforwards; (ii) future reversals of existing taxable temporary
differences; (iii) taxable income in prior carryback years; and (iv) tax planning strategies. Management may need to identify
and implement appropriate planning strategies to ensure its ability to realize deferred tax assets and reduce the likelihood
of the establishment of a valuation allowance with respect to such assets. See Note 21 for additional information on the
Company’s valuation allowance.
Sources of Revenue
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, administrative
services (including transfer agent and administration fees earned from providing services to retail mutual funds) and other
custodial services. Management and financial advice fees also include mortality and expense risk fees that are generally
calculated as a percentage of the fair value of assets held in separate accounts.
The Company’s management and financial advice fees are generally recognized when earned as the service is provided. A
significant portion of the Company’s management fees are calculated as a percentage of the fair value of its managed
assets. A large majority of the Company’s managed assets are valued by third party pricing services vendors based upon
observable market data. The selection of the Company’s third party pricing service 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 the Company’s 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.
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