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ITEM 8 / NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.....................................................................................................................................................................................Securities and spot commodities sold but not yet purchased represent sales of securities and spot commodities notowned at the time of sale. The obligations arising from such transactions are recorded on a trade-date basis andcarried at fair value. Fair values of securities sold but not yet purchased are based on current market prices. Fairvalues of spot commodities sold but not yet purchased are based on current market prices of reference spot futurescontracts traded on exchanges.For further discussion of secured financing arrangements, see Note 7 herein.(q) Long-term debt: For a discussion of our accounting policies on long-term debt, see Note 15 herein.(r) Contingent liabilities: For a discussion of our accounting policies on contingent liabilities, see Note 16 herein.(s) Foreign currency: Financial statement accounts expressed in foreign currencies are translated into U.S.dollars. Functional currency assets and liabilities are translated into U.S. dollars generally using rates of exchangeprevailing at the balance sheet date of each respective subsidiary and the related translation adjustments arerecorded as a separate component of Accumulated other comprehensive income (loss), net of any related taxes, inTotal AIG shareholders’ equity. Functional currencies are generally the currencies of the local operating environment.Financial statement accounts expressed in currencies other than the functional currency of a consolidated entity aretranslated into that entity’s functional currency. Income statement accounts expressed in functional currencies aretranslated using average exchange rates during the period. The adjustments resulting from translation of financialstatements of foreign entities operating in highly inflationary economies are recorded in income. Exchange gains andlosses resulting from foreign currency transactions are recorded in income.(t) Noncontrolling interests:herein.(u) Earnings (loss) per share:Note 19 hereinFor discussion of our accounting policies on noncontrolling interests, see Note 18For a discussion of our accounting policies on earnings (loss) per share, seeFuture Application of Accounting Standards..............................................................................................................................................................................................Testing Indefinite-Lived Intangible Assets for Impairment..............................................................................................................................................................................................In July 2012, the Financial Accounting Standards Board (FASB) issued an accounting standard that allows acompany the option to first assess qualitatively whether it is more likely than not that an indefinite-lived intangibleasset is impaired. A company is not required to calculate the fair value of an indefinite-lived intangible asset andperform the quantitative impairment test unless the company determines it is more likely than not the asset isimpaired.The standard is effective for annual and interim impairment tests performed for fiscal years beginning afterSeptember 15, 2012. While early adoption was permitted, we adopted the standard on its required effective date ofJanuary 1, 2013. We do not expect adoption of the standard to have a material effect on our consolidated financialcondition, results of operations or cash flows.Disclosures about Offsetting Assets and Liabilities..............................................................................................................................................................................................In February 2013 the FASB issued guidance that clarifies the scope of transactions subject to disclosures aboutoffsetting assets and liabilities. The guidance applies to derivatives, repurchase agreements and reverse purchaseagreements, and securities borrowing and securities lending transactions that are offset either in accordance withspecific criteria contained in FASB Accounting Standards Codification or subject to a master netting arrangement orsimilar agreement.The standard is effective for fiscal years and interim periods beginning on or after January 1, 2013, and will beapplied retrospectively to all comparative periods presented. We do not expect adoption of the standard to have amaterial effect on our consolidated financial condition, results of operations or cash flows...................................................................................................................................................................................................................................216 AIG 2012 Form 10-K