The Hartford 2008 Annual Report Download - page 348

Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. Basis of Presentation and Accounting Policies (continued)
Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities
In June 2008, the FASB issued FSP No. EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment
Transactions Are Participating Securities” (“FSP EITF 03-6-1”). The FSP addresses whether instruments granted in
share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the
earnings allocation in computing earnings per share (“EPS”) under the two-class method described in SFAS No. 128,
“Earnings per Share” (“SFAS 128”). The FSP requires that unvested share-based payment awards that contain
nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be
included in the computation of EPS pursuant to the two-class method. FSP EITF 03-6-1 is effective for financial statements
issued for fiscal years beginning after December 15, 2008, and interim periods within those years. All prior-period EPS data
presented shall be adjusted retrospectively (including interim financial statements, summaries of earnings, and selected
financial data) to conform with the provisions of this FSP. Early application is not permitted. The adoption of FSP EITF
03-6-1 on January 1, 2009, did not have a material effect on the Company’s earnings per share.
Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock
In June 2008, the FASB issued EITF No. 07-5, “Determining Whether an Instrument (or Embedded Feature) Is Indexed to
an Entity’s Own Stock” (“EITF 07-5”). EITF 07-5 addresses the determination of whether an instrument (or an embedded
feature) is indexed to an entity’s own stock for the purposes of determining whether an instrument is a derivative. To the
extent a derivative instrument or embedded derivative feature is deemed indexed to an entity’s own stock, it may be exempt
from the requirements of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”).
EITF 07-5 concluded that an entity should determine whether an equity-linked financial instrument (or embedded feature) is
indexed to its own stock first by evaluating the instrument’s contingent exercise provisions, if any, and then by evaluating
the instrument’s settlement provisions. EITF 07-5 will be effective for financial statements issued for fiscal years beginning
after December 15, 2008, and interim periods within those fiscal years. Earlier application is not permitted. EITF 07-5 shall
be applied to outstanding instruments as of the beginning of the fiscal year in which the EITF is adopted. The adoption of
EITF 07-5 on January 1, 2009, did not have a material effect on the Company’s consolidated financial statements.
Accounting for Financial Guarantee Insurance Contracts—an interpretation of FASB Statement No. 60
In May 2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts—an interpretation
of FASB Statement No. 60” (“SFAS 163”). The scope of SFAS 163 is limited to financial guarantee insurance (and
reinsurance) contracts issued by enterprises that are included within the scope of SFAS No. 60, “Accounting and Reporting
by Insurance Enterprises” (“SFAS 60”) and that are not accounted for as derivative instruments. SFAS 163 excludes from its
scope insurance contracts that are similar to financial guarantee insurance such as mortgage guaranty insurance and credit
insurance on trade receivables. SFAS 163 is effective for financial statements issued for fiscal years beginning after
December 15, 2008. The Company does not have financial guarantee insurance products, and, accordingly the adoption of
SFAS 163 did not have an effect on the Company’s consolidated financial statements.
Determination of the Useful Life of Intangible Assets
In April 2008, the FASB issued FSP No. FAS 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP FAS
142-3”). FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used
to determine the useful life of a recognized intangible asset under SFAS 142. FSP FAS 142-3 amends paragraph 11(d) of
SFAS 142 to require an entity to use its own assumptions about renewal or extension of an arrangement, adjusted for the
entity-specific factors in paragraph 11 of SFAS 142, even when there is likely to be substantial cost or material
modifications. FSP FAS 142-3 is effective for financial statements issued for fiscal years beginning after December 15,
2008, and interim periods within those fiscal years, with early adoption prohibited. The provisions of FSP FAS 142-3 are to
be applied prospectively to intangible assets acquired after January 1, 2009, for the Company, although the disclosure
provisions are required for all intangible assets recognized as of or subsequent to January 1, 2009. The adoption of FSP FAS
142-3 on January 1, 2009, did not have a material effect on the Company’s consolidated financial statements.
Disclosures about Derivative Instruments and Hedging Activities
In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an
amendment of FASB Statement No. 133” (“SFAS 161”). SFAS 161 amends and expands disclosures about an entity’s
derivative and hedging activities with the intent of providing users of financial statements with an enhanced understanding
of (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are
accounted for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items
affect an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009