Voya 2013 Annual Report Download - page 88

Changes in accounting standards could adversely impact our reported results of operations and our reported
financial condition.
Our financial statements are subject to the application of U.S. GAAP, which is periodically revised or
expanded. Accordingly, from time to time we are required to adopt new or revised accounting standards issued
by recognized authoritative bodies, including the Financial Accounting Standards Board (“FASB”). For example,
the adoption of the provision of Accounting Standards Update (“ASU”) 2010-26, Financial Services: Insurance
(Accounting Standards Codification™ (“ASC”) Topic 944): “Accounting for Costs Associated with Acquiring or
Renewing Insurance Contracts” decreased our retained earnings by $1.2 billion as of January 1, 2011. It is
possible that future accounting standards we are required to adopt could change the current accounting treatment
that we apply to our consolidated financial statements and that such changes could have a material adverse effect
on our results of operations and financial condition.
In addition, FASB is working on several projects with the International Accounting Standards Board, which
could result in significant changes as U.S. GAAP converges with IFRS, including how we account for our
insurance policies, annuity contracts and financial instruments and how our financial statements are presented.
Furthermore, the SEC is considering whether and how to incorporate IFRS into the U.S. financial reporting
system. The changes to U.S. GAAP and ultimate conversion to IFRS, if undertaken, could affect the way we
account for and report significant areas of our business, could impose special demands on us in the areas of
governance, employee training, internal controls and disclosure and will likely affect how we manage our
business.
We may be required to establish an additional valuation allowance against the deferred income tax asset if our
business does not generate sufficient taxable income or if our tax planning strategies are modified. Increases
in the deferred tax valuation allowance could have a material adverse effect on results of operations and
financial condition.
Deferred income tax represents the tax effect of the differences between the book and tax basis of assets and
liabilities. Deferred tax assets represent the tax benefit of future deductible temporary differences, operating loss
carryforwards and tax credits carryforward. We periodically evaluate and test our ability to realize our deferred
tax assets. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence, it is more
likely than not that some portion, or all, of the deferred tax assets will not be realized. In assessing the more
likely than not criteria, we consider future taxable income as well as prudent tax planning strategies. Future facts,
circumstances, tax law changes and FASB developments may result in an increase in the valuation allowance. An
increase in the valuation allowance could have a material adverse effect on the Company’s results of operations
and financial condition.
As of December 31, 2013, we have recognized deferred tax assets based on tax planning related to
unrealized gains on investment assets. To the extent these unrealized gains decrease, the tax benefit will be
reduced by increasing the tax valuation allowance. For example, if interest rates increase, the amount of the
unrealized gains will, most likely, decrease, with all other things constant. The decrease in the deferred tax asset
may be recorded as a tax expense in tax on continuing operations based on the intra period tax allocation rules
described in ASC Topic 740, “Income Taxes”.
We expect that our ability to use beneficial U.S. tax attributes will be subject to limitations.
Section 382 (“Section 382”) and Section 383 of the U.S. Internal Revenue Code of 1986, as amended (the
“Internal Revenue Code”) operate as anti-abuse rules, the general purpose of which is to prevent trafficking in
tax losses and credits, but which can apply without regard to whether a “loss trafficking” transaction occurs or is
intended. These rules are triggered when an “ownership change”—generally defined as when the ownership of a
company, or its parent, changes by more than 50% (measured by value) on a cumulative basis in any three year
period—occurs (“Section 382 event”). If triggered, the amount of the taxable income for any post-change year
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