Ameriprise 2014 Annual Report Download - page 72

upon the net present value of estimated future cash flows and incorporate current market observable inputs to the extent
available.
The accounting for changes in the fair value of a derivative instrument depends on its intended use and the resulting
hedge designation, if any. We primarily use derivatives as economic hedges that are not designated as accounting hedges
or do not qualify for hedge accounting treatment. We occasionally designate derivatives as (i) hedges of changes in the fair
value of assets, liabilities or firm commitments (‘‘fair value hedges’’), (ii) hedges of a forecasted transaction or of the
variability of cash flows to be received or paid related to a recognized asset or liability (‘‘cash flow hedges’’) or (iii) hedges
of foreign currency exposures of net investments in foreign operations (‘‘net investment hedges in foreign operations’’).
Our accounting policy is to not offset fair value amounts recognized for derivatives and collateral arrangements executed
with the same counterparty under the same master netting arrangement. Changes in fair value are recognized in current
period earnings for derivative instruments that do not qualify for hedge accounting or are not designated as accounting
hedges.
For derivative instruments that qualify as fair value hedges, changes in the fair value of the derivatives, as well as changes
in the fair value of the hedged assets, liabilities or firm commitments, are recognized on a net basis in current period
earnings. The carrying value of the hedged item is adjusted for the change in fair value from the designated hedged risk. If
a fair value hedge designation is removed or the hedge is terminated prior to maturity, previous adjustments to the carrying
value of the hedged item are recognized into earnings over the remaining life of the hedged item.
For derivative instruments that qualify as cash flow hedges, the effective portion of the gain or loss on the derivative
instruments is reported in AOCI and reclassified into earnings when the hedged item or transaction impacts earnings. The
amount that is reclassified into earnings is presented in the Consolidated Statements of Operations with the hedged
instrument or transaction impact. Any ineffective portion of the gain or loss is reported in current period earnings as a
component of net investment income. If a hedge designation is removed or a hedge is terminated prior to maturity, the
amount previously recorded in AOCI is reclassified to earnings over the period that the hedged item impacts earnings. For
any hedge relationships that are discontinued because the forecasted transaction is not expected to occur according to the
original strategy, any related amounts previously recorded in AOCI are recognized in earnings immediately.
For derivative instruments that qualify as net investment hedges in foreign operations, the effective portion of the change
in fair value of the derivatives is recorded in AOCI as part of the foreign currency translation adjustment. Any ineffective
portion of net investment hedges in foreign operations is recognized in net investment income during the period of change.
For further details on the types of derivatives we use and how we account for them, see Note 2 and Note 16 to our
Consolidated Financial Statements.
Income Tax Accounting
Income taxes, as reported in our Consolidated Financial Statements, represent the net amount of income taxes that we
expect to pay to or receive from various taxing jurisdictions in connection with our operations. We provide for income taxes
based on amounts that we believe we 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 the event that the ultimate tax treatment of items differs from our estimates, we may be required to
significantly change the provision for income taxes recorded in our Consolidated Financial Statements.
In connection with the provision for income taxes, our 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.
We are required to establish a valuation allowance for any portion of our 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 our ability to realize our deferred tax assets and reduce the
likelihood of the establishment of a valuation allowance with respect to such assets. See Note 21 to our Consolidated
Financial Statements for additional information on our valuation allowance.
Recent Accounting Pronouncements
For information regarding recent accounting pronouncements and their expected impact on our future consolidated results
of operations and financial condition, see Note 3 to our Consolidated Financial Statements.
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