2007 Annual Report - AIG.com
2007 Annual Report - AIG.com
2007 Annual Report - AIG.com
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American International Group, Inc. and Subsidiaries<br />
<strong>AIG</strong> continues to develop further enhancements to its controls<br />
Remediation of Prior Material Weakness in Internal Control<br />
over in<strong>com</strong>e tax accounting at certain business units. Based upon<br />
Over Financial <strong>Report</strong>ing<br />
the significant actions taken and the testing and evaluation of the<br />
<strong>AIG</strong> has been actively engaged in the implementation of remedia- effectiveness of the controls, <strong>AIG</strong> management has concluded the<br />
tion efforts to address the material weakness in controls over material weakness in <strong>AIG</strong>’s controls over in<strong>com</strong>e tax accounting<br />
in<strong>com</strong>e tax accounting that was in existence at December 31, no longer existed as of December 31, <strong>2007</strong>.<br />
2006. These remediation efforts, outlined below, are specifically<br />
designed to address the material weakness identified by <strong>AIG</strong> Continuing Remediation<br />
management. As a result of its assessment of the effectiveness<br />
<strong>AIG</strong> is actively engaged in the development and implementation of<br />
of internal control over financial reporting, <strong>AIG</strong> management<br />
a remediation plan to address the material weakness in controls<br />
determined that as of December 31, <strong>2007</strong>, the material weakover<br />
the fair value valuation of the <strong>AIG</strong>FP super senior credit<br />
ness relating to the controls over in<strong>com</strong>e tax accounting no longer<br />
default swap portfolio and oversight thereof as of December 31,<br />
existed.<br />
<strong>2007</strong>. The <strong>com</strong>ponents of this remediation plan, once imple-<br />
<strong>AIG</strong>’s remediation efforts were governed by a Steering Commitmented,<br />
are intended to ensure that the key controls over the<br />
tee, under the direction of <strong>AIG</strong>’s Chief Risk Officer and included<br />
valuation process are operating effectively and are sustainable.<br />
<strong>AIG</strong>’s Chief Executive Officer, Chief Financial Officer and Comptrol-<br />
These <strong>com</strong>ponents include assigning dedicated and experienced<br />
ler. The status of remediation was reviewed with the Audit<br />
resources at <strong>AIG</strong>FP with the responsibility for valuation, enhancing<br />
Committee who was advised of issues encountered and key<br />
the technical resources at <strong>AIG</strong> over the valuation of the super<br />
decisions reached by <strong>AIG</strong> management.<br />
senior credit default swap portfolio and strengthening corporate<br />
As of December 31, 2006, <strong>AIG</strong> did not maintain effective<br />
oversight over the valuation methodologies and processes. <strong>AIG</strong><br />
controls over the determination and reporting of certain <strong>com</strong>pomanagement<br />
continues to assign the highest priority to <strong>AIG</strong>’s<br />
nents of the provision for in<strong>com</strong>e taxes and related in<strong>com</strong>e tax<br />
remediation efforts in this area, with the goal of remediating this<br />
balances. Specifically, <strong>AIG</strong> did not maintain effective controls to<br />
material weakness by year-end 2008.<br />
review and monitor the accuracy of the <strong>com</strong>ponents of the in<strong>com</strong>e<br />
<strong>AIG</strong>’S remediation efforts will be governed by a Steering<br />
tax provision calculations and related in<strong>com</strong>e tax balances and to<br />
Committee under the direction of <strong>AIG</strong>’s Chief Risk Officer and also<br />
monitor the differences between the in<strong>com</strong>e tax basis and the<br />
including <strong>AIG</strong>’s Chief Executive Officer, Chief Financial Officer and<br />
financial reporting basis of assets and liabilities to effectively<br />
Comptroller. The status of remediation of the material weakness<br />
reconcile the differences to the deferred in<strong>com</strong>e tax balances.<br />
will be reviewed with the Audit Committee and this Committee will<br />
During <strong>2007</strong>, <strong>AIG</strong> management took the following actions to be advised of issues encountered and key decisions reached by<br />
remediate this material weakness:<br />
<strong>AIG</strong> management relating to the remediation efforts.<br />
( Implemented standard key controls to review and monitor the Notwithstanding the existence of this material weakness in<br />
in<strong>com</strong>e tax provision and related in<strong>com</strong>e tax balances at<br />
internal control over financial reporting relating to the fair value<br />
applicable <strong>AIG</strong> business units globally and parent <strong>com</strong>pany, and valuation of the <strong>AIG</strong>FP super senior credit default swap portfolio,<br />
conducted testing of these controls to verify their effectiveness, due to the substantive alternative procedures performed and<br />
( Completed the evaluation and reconciliation of certain historical <strong>com</strong>pensating controls introduced after December 31, <strong>2007</strong>, <strong>AIG</strong><br />
balance sheet in<strong>com</strong>e tax accounts at applicable <strong>AIG</strong> business believes that the consolidated financial statements fairly present,<br />
units globally and parent <strong>com</strong>pany, as well as a more detailed in all material respects, <strong>AIG</strong>’s consolidated financial condition as<br />
financial statement exposure analysis of in<strong>com</strong>e tax balances, of December 31, <strong>2007</strong> and 2006, and consolidated results of its<br />
( Hired additional qualified staff, including Tax Directors and Tax operations and cash flows for the years ended December 31,<br />
Accountants, at designated business units globally and parent <strong>2007</strong>, 2006 and 2005, in conformity with GAAP.<br />
<strong>com</strong>pany, and<br />
<strong>AIG</strong> recognizes that continued improvement in its internal<br />
( Continued the development and dissemination of in<strong>com</strong>e tax controls over financial reporting and consolidation processes,<br />
accounting training and education programs at parent <strong>com</strong>pany investment accounting, reinsurance accounting and in<strong>com</strong>e tax<br />
and business unit levels through site visits and training<br />
conferences.<br />
<strong>AIG</strong> <strong>2007</strong> Form 10-K 203