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Recent Accounting Pronouncements
 9 Months Ended
Sep. 30, 2016
New Accounting Pronouncements And Changes In Accounting Principles [Abstract]  
Recent Accounting Changes

Note 2 – Recent Accounting Pronouncements

 

The Company's 2015 Form 10-K includes discussion of significant recent accounting pronouncements that either have impacted or may impact our financial statements in the future. The following issuances of, and changes in, accounting pronouncements that apply to the Company have occurred since the Company filed its 2015 Form 10-K.

 

Recently Adopted Accounting Guidance

 

Improvements to Employee Share-Based Payment Accounting (Accounting Standards Update (“ASU”) 2016-09). In March 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance that changes the accounting for certain aspects of share-based payments to employees. The new guidance requires excess tax benefits or deficiencies to be recorded in the income statement when the awards vest or are settled, requires cash flows related to the excess tax benefits to be classified as an operating activity in the statement of cash flows, permits repurchasing more than was previously allowed of an employee's shares for tax withholding purposes without triggering liability accounting, clarifies that all cash payments made on an employee's behalf for withheld shares are to be presented as a financing activity in the statement of cash flows and provides an accounting policy election to account for forfeitures as they occur. In addition, the new guidance changes the calculation of common stock equivalents for earnings per share purposes.  The new standard is required to be adopted as of January 1, 2017.

 

As permitted, the Company elected to early adopt the new guidance effective January 1, 2016, which resulted in $25 million of tax benefits recorded in net income (in Corporate) during the nine months ended September 30, 2016 that previously would have been reported in additional paid-in capital.  The change in the calculation of common stock equivalents added approximately one million weighted average shares for the diluted earnings per share calculations for the nine months ended September 30, 2016.  The Company applied these provisions prospectively.

 

The Company retrospectively applied the provisions related to the presentation of employee taxes paid for withheld shares and reclassified $78 million of tax withholding from operating to financing activities in its Consolidated Statement of Cash Flows for the nine months ended September 30, 2015.  For the nine months ended September 30, 2016, the Company reflected $69 million of tax withholding in financing activities.  The ability under the new guidance to repurchase more employee shares for tax withholding purposes had no impact on the Company's financial statements because no changes have been made to the Company's withholding practices.  The Company elected to continue to estimate forfeitures expected to occur to determine the amount of compensation cost to be recognized in each period.

 

Amendments to the Consolidation Analysis (ASU 2015-02). The Company adopted this new consolidation guidance effective January 1, 2016 with no material effect on its financial statements. Among other provisions, the guidance defines limited partnerships as variable interest entities unless substantive kick-out rights or participating rights exist. See Note 10 for additional disclosures about various real estate and security limited partnerships that are newly identified as variable interest entities for which the Company is not the primary beneficiary.

 

Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) (ASU 2015-07). This amendment removed the requirement to categorize all investments within the fair value hierarchy for which fair value is measured using the practical expedient of net asset value (“NAV”) per share. The Company adopted this new guidance effective January 1, 2016. Upon adoption, the Company began to separately disclose certain separate account investments and provided comparable prior period disclosure. See Note 7 for this separate disclosure information.

       

Recently Issued Accounting Guidance Not Yet Adopted

 

Except as noted below, there were no other new accounting pronouncements that were issued or became effective since the issuance of the Company's 2015 Annual Report on Form 10-K that had, or are expected to have, a material impact on the Company's consolidated financial position, results of operations or cash flows.

 

Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory (ASU 2016-16). In October 2016, the FASB issued this new standard that requires entities to recognize the tax impacts of all intra-entity sales of assets other than inventory even though the pre-tax effects of those transactions are eliminated in consolidation. The new standard is required to be adopted as of January 1, 2018, with early adoption permitted as of January 1, 2017. The new standard is required to be adopted in a modified retrospective approach, with a cumulative-effect adjustment recorded in retained earnings to write off any unamortized tax expense previously deferred and record any previously unrecognized net deferred tax assets. The Company is evaluating the impact of this new standard on its financial statements and disclosures.

 

Statement of Cash Flows (ASU 2016-15). In August 2016, the FASB issued this new standard that is a consensus of the FASB's Emerging Issues Task Force. The standard provides new guidance on how certain transactions should be classified in the statement of cash flows. The new standard is required to be adopted as of January 1, 2018, with early adoption permitted as of January 1, 2017. Upon adoption, the effects of the new guidance must be applied retrospectively to all prior periods presented. The Company is evaluating its implementation timing options as well as the impact of this new standard on its financial statements and disclosures.

 

Financial Instruments – Credit Losses (ASU 2016-13). In June 2016, the FASB issued this new standard that introduces a new approach to estimate credit losses on certain types of financial instruments based on expected losses. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. The ASU will be effective January 1, 2020, and early adoption is permitted on January 1, 2019. The Company is evaluating the impact of this new standard on its financial statements and disclosures.

 

Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01). As previously disclosed in the Company's 2015 Form 10-K, in January 2016 the FASB issued guidance that will require entities to measure equity investments at fair value in net income if they are not consolidated or accounted for under the equity method. The new standard will be effective January 1, 2018 and its effect will be recognized as a cumulative effect adjustment to the beginning balance of retained earnings. The Company has identified certain limited partnership interests carried at cost that are subject to the requirements of this new standard. If adopted as of September 30, 2016, the impact of this new guidance would have resulted in a cumulative effect increase to retained earnings of approximately $60 million after-tax. The actual cumulative effect adjustment will depend on the portfolio and market conditions as of the date of implementation.

 

Revenue from Contracts with Customers (ASU 2014-09). The FASB issued three new ASUs in 2016 further clarifying the broader revenue guidance:

  • “Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net)” (ASU 2016-08) that clarifies the definition of principals and agents.
  • “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing” (ASU 2016-10) that clarifies guidance and adds examples to help companies properly identify performance obligations.  This ASU also illustrates when a license provides a customer with a right to use (point in time) versus a right to access (over time) benefit.
  • “Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients” (ASU 2016-12) that clarifies certain aspects of the previously-issued guidance, including the objective of the collectability criterion in the new revenue model.

 

These clarifications, together with the broader revenue recognition guidance within ASU 2014-09, are required to be adopted beginning January 1, 2018, with early adoption permitted as of January 1, 2017.  The Company does not plan to early adopt this new guidance but continues to monitor developing implementation guidance and evaluate these new requirements for its non-insurance customer contracts to determine its method of implementation and any resulting estimated effects on its financial statements.