Unum 2010 Annual Report Download - page 101

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Unum 2010 Annual Report
exposure and its assessment of risk in estimating its allowance for credit losses effective December 31, 2010. The adoption of this update
expanded our disclosures but had no effect on our financial position or results of operation.
ASC 810 “Consolidation.” In June 2009, the FASB issued an update to require a qualitative rather than a quantitative analysis to
determine the primary beneficiary of a variable interest entity and require enhanced disclosures about an enterprise’s involvement with a
variable interest entity. We adopted this update effective January 1, 2010. The adoption of this update had no effect on our financial position
or results of operations.
ASC 820 “Fair Value Measurements and Disclosures.” In January 2010, the FASB issued an update to require a number of additional
disclosures regarding fair value measurements. Specifically, the update requires a reporting entity to disclose the amounts of significant
transfers between Level 1 and Level 2 of the three tier fair value hierarchy and the reasons for these transfers, as well as the reasons for
any transfers in or out of Level 3, effective for annual and interim periods beginning after December 15, 2009. The update also requires
information in the reconciliation of recurring Level 3 measurements about purchases, sales, issuances, and settlements on a gross basis,
effective for annual and interim periods beginning after December 15, 2010. We adopted this update in its entirety, including early adoption
of the additional Level 3 information, effective January 1, 2010. The adoption of this update expanded our disclosures but had no effect on
our financial position or results of operations.
ASC 860 “Transfers and Servicing.” In June 2009, the FASB issued an update to eliminate the exceptions for qualifying special-purpose
entities from the consolidation guidance and eliminate the exception that permitted sale accounting for certain mortgage securitizations
when a transferor has not surrendered control over the transferred financial assets. In addition, this update clarifies certain requirements for
financial assets that are eligible for sale accounting and requires enhanced disclosures about the risks that a transferor continues to be
exposed to because of its continuing involvement in transferred financial assets. We adopted this update effective January 1, 2010. The
adoption of this update had no effect on our financial position or results of operations.
Accounting Updates Adopted in 2009:
ASC 105 “Generally Accepted Accounting Principles.” In June 2009, the FASB established the FASB Accounting Standards Codification
(Codification) as the source of authoritative accounting principles to be applied by nongovernmental entities in the preparation of financial
statements in conformity with GAAP. Securities and Exchange Commission (SEC) rules and interpretive releases, which may not be included
in their entirety within the Codification, will remain as authoritative GAAP for SEC registrants. We adopted Codification effective July 1, 2009.
The adoption of Codification had no effect on our financial position or results of operations.
ASC 320 “Investments — Debt and Equity Securities.” In April 2009, the FASB issued a new accounting standard, now included in
ASC 320, which amends the other-than-temporary impairment guidance for debt securities and expands and increases the frequency of
previously existing disclosures for other-than-temporary impairments. The measure of impairment remains fair value. Under the standard,
an other-than-temporary impairment must be recognized in earnings for a debt security in an unrealized loss position when an entity either
(a) has the intent to sell the debt security or (b) more likely than not will be required to sell the debt security before its anticipated recovery.
The amount of impairment recognized is equal to the difference between amortized cost and fair value. For all debt securities in
unrealized loss positions that do not meet either of these two criteria, the standard requires that an entity analyze its ability to recover
the amortized cost by comparing the present value of cash ows with the amortized cost of the security. If the present value of our best
estimate of cash ows expected to be collected is less than the amortized cost of the security, an other-than-temporary impairment is
recorded. The impairment loss is separated into two components, the portion of the impairment related to credit and the portion related to
factors other than credit. The credit-related portion of an other-than-temporary impairment, which is the difference between the amortized
cost of the security and the present value of cash ows expected to be collected, is recognized in earnings.
Other-than-temporary impairments related to factors other than credit are charged to earnings if it is unlikely that the fair value of the
security will recover prior to its disposal. Otherwise, non-credit-related other-than-temporary impairments are charged to other
comprehensive income, net of tax. We adopted this standard effective April 1, 2009. The cumulative effect of applying the provisions of this
standard increased the April 1, 2009 opening balance of retained earnings $14.3 million, net of tax of $7.7 million, with a corresponding
adjustment to accumulated other comprehensive income (loss).