Accounting Principles and Practices

6 Months Ended

Jun. 30, 2012

Accounting Principles and Practices

Accounting Principles and Practices

2.  Accounting Principles and Practices

Changes in Accounting Principles

Goodwill Impairment

In September 2011, the Financial Accounting Standards Board (“FASB”) issued final guidance on goodwill impairment that gives an entity the option to perform a qualitative assessment that may eliminate the requirement to perform the annual two-step test.  The two-step test requires an entity to assess goodwill for impairment by quantitatively comparing the fair value of a reporting unit with its carrying amount, including goodwill (Step 1).  If the reporting unit’s fair value is less than its carrying amount, Step 2 of the test must be performed to measure the amount of goodwill impairment, if any.  The recently issued guidance gives an entity the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.  If an entity concludes that this is the case, it must perform the two-step test.  Otherwise, the two-step test is not required.  The Company early adopted this guidance in the fourth quarter 2011.  The adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements.

Comprehensive Income

In June 2011, the FASB issued guidance that updates principles related to the presentation of comprehensive income.  The revised guidance requires companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements and eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity.  The guidance, which must be applied retroactively, was effective for Aon beginning in the first quarter of 2012.  The adoption of this guidance affects only the presentation of these Condensed Consolidated Financial Statements, and had no effect on the financial condition, results of operations or cash flows of the Company.

Fair Value Measurement

In May 2011, the FASB issued guidance that clarifies the application of existing fair value measurements and disclosures, and changes certain principles or requirements for fair value measurements and disclosures. The additional required disclosures include quantitative information, sensitivity discussion, and description of the valuation process, as well as increased disclosure of unobservable inputs that are significant to the fair value measurement and transfers between Level 1 and Level 2.  The guidance is effective for Aon beginning in the first quarter 2012.  The adoption of this guidance did not have a material impact on the Company’s financial statements.