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ITEM 8 / NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.....................................................................................................................................................................................contracts consist of benefits paid and changes in future policy benefits liabilities. Benefits for universal life andinvestment-type products primarily consist of benefit payments made in excess of policy account balances except forcertain contracts for which the fair value option was elected, for which benefits represent the entire change in fairvalue (including derivative gains and losses on related economic hedges).Interest credited to policyholder account balances: Represents interest on account-value-based policyholderdeposits consisting of amounts credited on non-equity-indexed account values, accretion to the host contract forequity indexed products, and net amortization of sales inducements.Amortization of deferred acquisition costs: For a discussion of our accounting policies on amortization ofdeferred policy acquisition costs, see Note 10 herein.(b) Held-for-sale and discontinued operations: For a discussion of our accounting policies on reporting abusiness as held for sale or as discontinued operations, see Note 4 herein.(c)Investments:Fixed maturity and equity securities: For a discussion of our accounting policies on classification,measurement and other-than-temporary impairment of fixed maturity and equity securities, see Note 7 herein.Mortgage and other loans receivable – net: For discussion of our policies on classification, measurement andthe allowance for credit losses on mortgages and other loans receivable, see Note 8 herein.Other invested assets: For a discussion of our accounting policies on classification, measurement andother-than-temporary impairment of other invested assets, see Note 7 herein.Short-term investments: Short-term investments consist of interest-bearing cash equivalents, time deposits,securities purchased under agreements to resell, and investments, such as commercial paper, with original maturitieswithin one year from the date of purchase.For a discussion of our accounting policies on securities purchased under agreements to resell, see Note 7 herein.(d) Cash: Cash represents cash on hand and non-interest bearing demand deposits.(e) Premiums and other receivables – net: Premiums and other receivables includes premium balancesreceivable, amounts due from agents and brokers and insureds, trade receivables for the DIB and GCM and otherreceivables. Trade receivables for GCM include cash collateral posted to derivative counterparties that are noteligible to be netted against derivative liabilities. The allowance for doubtful accounts on premiums and otherreceivables was $619 million and $484 million at December 31, 2012 and 2011, respectively.(f) Reinsurance assets – net:Note 9 herein.(g) Deferred policy acquisition costs (DAC):acquisition costs, see Note 10 herein.For a discussion about our accounting policies on reinsurance assets – net, seeFor discussion of our accounting policies on deferred policy(h) Derivative assets and derivative liabilities, at fair value: For discussion of our accounting policies onderivative assets and derivative liabilities, at fair value, see Note 12 herein.(i) Other assets: Other assets consists of sales inducement assets, prepaid expenses, deposits, other deferredcharges, real estate, other fixed assets, capitalized software costs, goodwill, intangible assets other than goodwill,and restricted cash.We offer sales inducements, which include enhanced crediting rates or bonus payments to contract holders (bonusinterest) on certain annuity and investment contract products. Sales inducements provided to the contractholder arerecognized as part of the liability for policyholders’ contract deposits in the Consolidated Balance Sheet. Suchamounts are deferred and amortized over the life of the contract using the same methodology and assumptions usedto amortize DAC (see Note 10 herein). To qualify for such accounting treatment, the bonus interest must be explicitlyidentified in the contract at inception. We must also demonstrate that such amounts are incremental to amounts wecredit on similar contracts without bonus interest, and are higher than the contract’s expected ongoing crediting ratesfor periods after the bonus period. The deferred bonus interest and other deferred sales inducement assets totaled$517 million and $803 million at December 31, 2012 and 2011, respectively. The amortization expense associated..................................................................................................................................................................................................................................AIG 2012 Form 10-K 213