Primerica 2010 Annual Report - Direct Selling News

New Accounting PrinciplesScope Exception Related to Embedded CreditDerivatives. In March 2010, the FASB issuedASU 2010-11, Scope Exception Related toEmbedded Credit Derivatives. The updateclarifies guidance on accounting for embeddedderivatives to reduce the breadth of the scopeexception for bifurcating and separatelyaccounting for certain embedded creditderivative features related to the transfer ofcredit risk in the form of subordination of onefinancial instrument to another. We adoptedthe update as of July 2010. The update did notimpact our financial position or results ofoperations.Subsequent Event Disclosure. In February 2010,the FASB issued ASU 2010-9, Amendments toCertain Recognition and DisclosureRequirements. The update requires publiccompanies to assess subsequent eventsthrough the date of issuing its financialstatements but does not require disclosure ofthe date through which we have assessedsubsequent events. We adopted ASU 2010-9 asof January 2010. The update did not impact ourfinancial position or results of operations.Additional Fair Value Measurement Disclosure.In January 2010, the FASB issued ASU 2010-6,Improving Disclosures About Fair ValueMeasurements. The update requires additionaldisclosure for significant transfers into and outof level 1 and level 2 instruments for reportingperiods beginning after December 15, 2009.Additionally, separate presentation ofpurchases, sales, issuances, and settlementswill be required for activity in level 3instruments for reporting periods beginningafter December 15, 2010. This new guidance didnot impact our financial position or results ofoperations.Elimination of QSPEs and Changes in theConsolidation Model for Variable InterestEntities. In June 2009, the FASB issued SFASNo. 166, Accounting for Transfers of FinancialAssets, an amendment of FASB StatementNo. 140, now authoritative under ASC 860 (ASC860) and SFAS No. 167, Amendments to FASBInterpretation No. 46(R), now authoritativeunder ASC 810 (ASC 810). ASC 860 eliminatesthe concept of Qualifying Special PurposeEntities (QSPEs), changes the requirements forthe derecognition of financial assets, and callsupon sellers of the assets to make additionaldisclosures about them. ASC 810 details threekey changes to the consolidation model. First,former QSPEs are now included in the scope ofASC 810. In addition, the FASB has changed themethod of analyzing which party to a variableinterest entity (VIE) should consolidate the VIE(known as the primary beneficiary) to aqualitative determination of which party to theVIE has “power” combined with potentiallysignificant benefits or losses, instead of theprevious quantitative risks and rewards model.The entity that has power has the ability todirect the activities of the VIE that mostsignificantly impact the VIE’s economicperformance. Finally, the new standard requiresthat the primary beneficiary analysis bere-evaluated whenever circumstances change.The previous rules required reconsideration ofthe primary beneficiary only when specifiedreconsideration events occurred. We adoptedboth standards on January 1, 2010. Theadoption of this guidance has not requiredconsolidation of any variable interest entitiesand did not impact our financial position orresults of operations.Other-Than-Temporary Impairments onInvestment Securities. In April 2009, the FASBissued FSP SFAS No. 115-2 and SFAS No. 124-2,Recognition and Presentation of Other-Than-Temporary Impairments (ASC 320-10/FSPSFAS 115-2), which amends the recognitionguidance for OTTI of debt securities andexpands the financial statement disclosures forOTTI on debt and equity securities. TheCompany adopted the FSP in the first quarterof 2009.As a result of this FSP, the Company’sconsolidated and combined statements ofincome reflect the full impairment (that is, thedifference between the security’s amortizedcost basis and fair value) on debt securities thatthe Company intends to sell or would morelikelythan-not be required to sell before theexpected recovery of the amortized cost basis.Primerica 2010 Annual Report 119