Prudential 2003 Annual Report Download - page 113

PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
In November 2002, the FASB issued FIN No. 45, “Guarantor’s Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others.” FIN No. 45 expands existing accounting
guidance and disclosure requirements for certain guarantees and requires the recognition of a liability for the fair value
of certain types of guarantees issued or modified after December 31, 2002. The January 1, 2003 adoption of the
Interpretation’s guidance did not have a material effect on the Company’s financial position.
In June 2001, the FASB issued SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 requires
that an intangible asset acquired either individually or with a group of other assets shall initially be recognized and
measured based on fair value. An intangible asset with a finite life is amortized over its useful life to the reporting
entity; an intangible asset with an indefinite useful life, including goodwill, is not amortized. All indefinite lived
intangible assets shall be tested for impairment in accordance with the statement. The Company adopted SFAS No. 142
as of January 1, 2002.
In August 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived
Assets.” SFAS No. 144 eliminated the requirement that discontinued operations be measured at net realizable value or
that entities include losses that have not yet occurred. SFAS No. 144 eliminated the exception to consolidation for a
subsidiary for which control is likely to be temporary. The implementation of this provision was not material to the
Company’s financial position. SFAS No. 144 requires that long-lived assets that are to be disposed of by sale be
measured at the lower of book value or fair value less cost to sell. An impairment for assets that are not to be disposed
of is recognized only if the carrying amounts of long-lived assets are not recoverable and exceed their fair values.
Additionally, SFAS No. 144 expands the scope of discontinued operations to include all components of an entity with
operations and cash flows that (1) can be distinguished from the rest of the entity and (2) will be eliminated from the
ongoing operations of the entity in a disposal transaction. Consequently, certain activities included in discontinued
operations in the accompanying financial statements would not have been recorded as discontinued operations prior to
the adoption of SFAS No. 144. See Note 3 for additional information pertaining to discontinued operations. The
Company adopted SFAS No. 144 effective January 1, 2002.
Reclassifications
Certain amounts in prior years have been reclassified to conform to the current year presentation.
3. ACQUISITIONS AND DISPOSITIONS
Acquisition of CIGNA Corporation’s Retirement Business
On November 17, 2003, the Company announced that it had entered into a definitive Stock Purchase and Asset
Transfer Agreement with CIGNA Corporation (“CIGNA”) and certain of its affiliates, pursuant to which the Company
will acquire CIGNA’s retirement business. The total consideration payable in the transaction is a cash purchase price of
$2.1 billion, subject to certain adjustments. The transaction is subject to various closing conditions, including, among
others, state insurance and other regulatory approvals and is expected to close in the first half of 2004.
Acquisition of Skandia U.S. Inc.
On May 1, 2003, the Company acquired Skandia U.S. Inc. (“Skandia U.S.”), a wholly owned subsidiary of
Skandia Insurance Company Ltd. (“Skandia”). The Company purchased newly issued shares of common stock
representing 90% of the outstanding common stock of Skandia U.S. and one share of a newly issued class of preferred
stock (collectively the “Shares”) and entered into an agreement at the date of acquisition whereby the Company had the
Prudential Financial 2003 Annual Report 111