Ameriprise 2015 Annual Report Download - page 134

liabilities of the collateralized financing entity at fair value. The update provides a measurement alternative which would
allow an entity to measure both the financial assets and financial liabilities at the fair value of the more observable of the
fair value of the financial assets or financial liabilities. When the measurement alternative is elected, the reporting entity’s
net income should reflect its own economic interests in the collateralized financing entity, including changes in the fair
value of the beneficial interests retained by the reporting entity and beneficial interests that represent compensation for
services. If the measurement alternative is not elected, the financial assets and financial liabilities should be measured
separately in accordance with the requirements of the fair value accounting standard. Any difference in the fair value of the
assets and liabilities would be recorded to net income attributable to the reporting entity. The standard is effective for
interim and annual periods beginning after December 15, 2015 and early adoption is permitted as of the beginning of an
annual period. The standard may be adopted using a modified retrospective approach by recording a cumulative-effect
adjustment to equity at the beginning of the period of adoption or applied retrospectively. The Company adopted the
standard on January 1, 2016 and elected the measurement alternative using the modified retrospective approach. The
adoption of the standard did not have a material impact on the Company’s consolidated results of operations and financial
condition after the deconsolidation of several CLOs noted above.
Compensation — Stock Compensation
In June 2014, the FASB updated the accounting standards related to stock compensation. The update clarifies the
accounting for share-based payments with a performance target that could be achieved after the requisite service period.
The update specifies the performance target should not be reflected in estimating the grant-date fair value of the award.
Instead, the probability of achieving the performance target should impact vesting of the award. The standard is effective
for interim and annual periods beginning after December 15, 2015 and early adoption is permitted. The Company adopted
the standard on January 1, 2016. The adoption did not have a material impact on the Company’s consolidated results of
operations and financial condition.
Revenue from Contracts with Customers
In May 2014, the FASB updated the accounting standards for revenue from contracts with customers. The update provides
a five step revenue recognition model for all revenue arising from contracts with customers and affects all entities that
enter into contracts to provide goods or services to their customers (unless the contracts are in the scope of other
standards). The standard also updates the accounting for certain costs associated with obtaining and fulfilling a customer
contract. In addition, the standard requires disclosure of quantitative and qualitative information that enables users of
financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from
contracts with customers. In August 2015, the FASB updated the accounting standards to defer the effective date by one
year. The standard is effective for interim and annual periods beginning after December 15, 2017 and early adoption is
permitted for interim and annual periods beginning after December 15, 2016. The standard may be applied retrospectively
for all periods presented or retrospectively with a cumulative-effect adjustment at the date of adoption. The Company is
currently evaluating the impact of the standard on its consolidated results of operations, financial condition and
disclosures.
4. Variable Interest Entities
The Company provides asset management services to investment entities which are considered to be VIEs, such as CLOs,
hedge funds, property funds and private equity funds (collectively, ‘‘investment entities’’), which are sponsored by the
Company. The Company consolidates certain CLOs and property funds (collectively, ‘‘consolidated investment entities’’). In
addition, the Company invests in structured investments and affordable housing partnerships which are considered VIEs
which the Company does not consolidate. See Note 2 for further discussion of the Company’s accounting policy on
consolidation.
Non-Consolidated VIEs
The Company has determined that consolidation is not required for hedge funds and private equity funds which are
sponsored by the Company. The Company’s maximum exposure to loss with respect to its investment in these entities is
limited to its carrying value. The carrying value of the Company’s investment in these entities was $85 million and
$89 million as of December 31, 2015 and 2014, respectively.
The Company manages one CLO which it does not consolidate. The Company manages the CLO and earns management
fees and incentive fees from the CLO based on the CLO’s collateral pool. Unlike the consolidated CLOs, the Company has
no investment in the CLO.
The Company has variable interests in affordable housing partnerships for which it is not the primary beneficiary and
therefore does not consolidate. The Company’s maximum exposure to loss as a result of its investment in affordable
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