AmazonScience/document-haystack

1ESTIMATES AND ASSUMPTIONS2Estimates or assumptions used in the preparation of financial statements and modeled results used in various areas of our 3business may differ materially from actual experience. 4Our financial statements are prepared in conformity with U.S. Generally Accepted Accounting Principles (U.S. GAAP), which requires 5the application of accounting policies that often involve a significant degree of judgment. The accounting policies that we consider 6most dependent on the application of estimates and assumptions, and therefore may be viewed as critical accounting estimates, are 7described in Note 1 to the Consolidated Financial Statements and in Item 7. MD&A – Critical Accounting Estimates. These accounting 8estimates require the use of assumptions, some of which are highly uncertain at the time of estimation. These estimates are based on 9judgment, current facts and circumstances, and, when applicable, models developed internally or with inputs from third parties. 10Therefore, actual results may differ from these estimates and models, possibly in the near term, and could have a material effect on 11our financial statements.12In addition, we employ models to price products, calculate reserves and future policy benefits and value assets and execute hedging 13strategies, as well as to assess risk and determine statutory capital requirements, among other uses. These models are complex and 14rely on estimates and projections that are inherently uncertain, may use incomplete, outdated or incorrect data or assumptions and 15may not operate as intended. To the extent that any of our operating practices and procedures do not accurately produce, or 16reproduce, data that we use to conduct any or all aspects of our business, such differences may negatively impact our business, 17reputation, results of operations, and financial condition. For our Life and Retirement companies, significant changes in policyholder 18behavior assumptions such as lapses, surrenders and withdrawal rates as well as the amount of withdrawals, fund performance, 19equity market returns and volatility, interest rate levels, the health habits of the insured population, technologies and treatments for 20disease or disability, the economic environment, or other factors could negatively impact our assumptions and estimates. To the 21extent that any of our modeling practices do not accurately produce, or reproduce, data that we use to conduct any or all aspects of 22our business, such errors may negatively impact our business, reputation, results of operations and financial condition.23Changes in accounting principles and financial reporting requirements may impact our consolidated results of operations 24and financial condition. 25Our financial statements are prepared in accordance with U.S. GAAP, which are periodically revised. Accordingly, from time to time, 26we are required to adopt new or revised accounting standards issued by recognized authoritative bodies, including the Financial 27Accounting Standards Board (FASB). The adoption of new or revised accounting standards has in the past, and may in the future 28impact, our reported consolidated results of operations, liquidity and reported financial condition and may cause investors to perceive 29greater volatility in our financial results, negatively impacting our level of investor interest and investment.30For information regarding the impact of accounting pronouncements that have been issued but are not yet required to be 31implemented, see Note 2 to the Consolidated Financial Statements.32If our businesses do not perform well and/or their estimated fair values decline, we may be required to recognize an 33impairment of our goodwill or establish an additional valuation allowance against the deferred income tax assets, which 34could have a material adverse effect on our results of operations and financial condition. 35Goodwill represents the excess of the amounts we paid to acquire subsidiaries and other businesses over the fair value of their net 36assets at the date of acquisition. We test goodwill at least annually for impairment and conduct interim qualitative assessments on a 37periodic basis. Impairment testing is performed based upon estimates of the fair value of the “reporting unit” to which the goodwill 38relates. In 2023, for substantially all of the reporting units we elected to bypass the qualitative assessment of whether goodwill 39impairment may exist and, therefore, performed quantitative assessments that supported a conclusion that the fair value of all of the 40reporting units tested exceeded their book value. Our goodwill balance was $3.5 billion at December 31, 2023. If it is determined that 41goodwill has been impaired, we must write down goodwill by the amount of the impairment, with a corresponding charge to net 42income (loss). These write-downs could have a material adverse effect on our consolidated results of operations, liquidity and 43financial condition. For additional information on goodwill impairment, see Part II, Item 7. MD&A – Critical Accounting Estimates – 44Goodwill Impairment and Note 12 to the Consolidated Financial Statements.45Deferred income tax represents the tax effect of the differences between the book and tax basis of assets and liabilities. As of 46December 31, 2023, we had net deferred tax assets, after valuation allowance, of $14.1 billion, related to federal, foreign, and state 47and local jurisdictions. If, based on available evidence, it is more likely than not that the deferred tax asset will not be realized, then a 48valuation allowance must be established with a corresponding charge to net income, which such action we have taken from time to 49time. Such charges could have a material adverse effect on our consolidated results of operations, liquidity and financial condition. 50For additional information on deferred tax assets, see Part II, Item 7. MD&A – Critical Accounting Estimates – Income Taxes and 51Note 23 to the Consolidated Financial Statements.52ITEM 1A | Risk Factors5336 AIG | 2023 Form 10-K