The Hartford 2008 Annual Report Download - page 368

Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. Basis of Presentation and Accounting Policies (continued)
Income Taxes
The Company recognizes taxes payable or refundable for the current year and deferred taxes for the tax consequences of
differences between the financial reporting and tax basis of assets and liabilities. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years the temporary differences are expected to
reverse. See Note 13 for a further discussion of the accounting for income taxes.
Property and Equipment
Property and equipment is carried at cost net, of accumulated depreciation. Depreciation is based on the estimated useful
lives of the various classes of property and equipment and is determined principally on the straight-line method.
Accumulated depreciation was $1.6 billion and $1.4 billion as of December 31, 2008 and 2007, respectively. Depreciation
expense was $228, $232 and $193 for the years ended December 31, 2008, 2007 and 2006, respectively.
Goodwill
Goodwill represents the excess of costs over the fair value of net assets acquired. Goodwill is not amortized but is reviewed
for impairment at least annually or more frequently if events occur or circumstances change that would indicate that a
triggering event, as defined in SFAS 142, “Goodwill and Other Intangible Assets” (SFAS 142), has occurred. The goodwill
impairment test follows a two step process as defined in SFAS 142. In the first step, the fair value of a reporting unit is
compared to its carrying value. If the carrying value of a reporting unit exceeds its fair value, the second step of the
impairment test is performed for purposes of measuring the impairment. In the second step, the fair value of the reporting
unit is allocated to all of the assets and liabilities of the reporting unit to determine an implied goodwill value. This
allocation is similar to a purchase price allocation performed in purchase accounting. If the carrying amount of the reporting
unit goodwill exceeds the implied goodwill value, an impairment loss shall be recognized in an amount equal to that excess.
Pension Plans and Postretirement Health Care and Life Insurance Benefit Plans
The Company maintains a U.S. qualified defined benefit pension plan (the “Plan”) that covers substantially all employees,
as well as unfunded excess plans to provide benefits in excess of amounts permitted to be paid to participants of the Plan
under the provisions of the Internal Revenue Code. The Company has also entered into individual retirement agreements
with certain retired directors providing for unfunded supplemental pension benefits. In addition, the Company provides
certain health care and life insurance benefits for eligible retired employees. Pursuant to accounting principles related to the
Company’s pension and other postretirement obligations to employees under its various benefit plans, the Company is
required to make a significant number of assumptions in order to calculate the related liabilities and expenses each period.
See Note 17 for more information regarding our accounting for pension plans and postretirement health care and life
insurance benefit plans.
Contingencies
Management follows the requirements of SFAS No. 5 “Accounting for Contingencies.” This statement requires management
to evaluate each contingent matter separately. A loss is recorded if probable and reasonably estimable. Management
establishes reserves for these contingencies at its “best estimate,” or, if no one number within the range of possible losses is
more probable than any other, the Company records an estimated reserve at the low end of the range of losses.
F-23
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009