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ITEM 8 / NOTE 6. FAIR VALUE MEASUREMENTS.....................................................................................................................................................................................During 2012, 2011 and 2010, we recognized losses of $641 million, gains of $420 million and losses of $779 million,respectively, attributable to the observable effect of changes in credit spreads on our own liabilities for which the fairvalue option was elected. We calculate the effect of these credit spread changes using discounted cash flowtechniques that incorporate current market interest rates, our observable credit spreads on these liabilities and otherfactors that mitigate the risk of nonperformance such as cash collateral posted.The following table presents the difference between fair values and the aggregate contractual principalamounts of mortgage and other loans receivable and long-term borrowings for which the fair value optionwas elected:December 31, 2012 December 31, 2011OutstandingOutstanding(in millions) Fair Value Principal Amount Difference Fair Value Principal Amount DifferenceAssets:Mortgage and other loans receivable $ 134 $ 141 $ (7) $ 107 $ 150 $ (43)Liabilities:Long-term debt * $ 8,055 $ 5,705 $ 2,350 $ 10,766 $ 8,624 $ 2,142* Includes GIAs, notes, bonds, loans and mortgages payable.There were no mortgage or other loans receivable for which the fair value option was elected that were 90 days ormore past due or in non-accrual status at December 31, 2012 and 2011.Fair Value Measurements on a Non-Recurring Basis..............................................................................................................................................................................................We measure the fair value of certain assets on a non-recurring basis, generally quarterly, annually or when events orchanges in circumstances indicate that the carrying amount of the assets may not be recoverable. These assetsinclude cost and equity-method investments, life settlement contracts, collateral securing foreclosed loans and realestate and other fixed assets, goodwill and other intangible assets. See Note 7 herein for additional information abouthow we test various asset classes for impairment.The following table presents assets measured at fair value on a non-recurring basis at the time ofimpairment and the related impairment charges recorded during the periods presented:Assets at Fair ValueImpairment ChargesNon-Recurring Basis December 31,(in millions) Level 1 Level 2 Level 3 Total 2012 2011 2010December 31, 2012Investment real estate $ – $ – $ – $ – $ – $ 18 $ 604Other investments – – 2,062 2,062 460 639 323Aircraft (a) – – – – – 1,693 1,614Other assets – 3 18 21 11 3 5Total $ – $ 3 $ 2,080 $ 2,083 $ 471 $ 2,353 $ 2,546December 31, 2011Investment real estate $ – $ – $ 457 $ 457Other investments – – 2,199 2,199Aircraft (b) – – 1,683 1,683Other assets – – 4 4Total $ – $ – $ 4,343 $ 4,343(a)See Note 4 for a discussion on the ILFC Transaction.(b)Fair value of Aircraft includes aircraft impairment charges...................................................................................................................................................................................................................................250 AIG 2012 Form 10-K