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Fair Value Of Assets And Liabilities
 12 Months Ended
Dec. 31, 2011
Fair Value Disclosures [Abstract]  
Fair Value Of Assets And Liabilities
FAIR VALUE OF ASSETS AND LIABILITIES

The carrying value and fair value of financial instruments is presented in the below summary table. The fair value of financial instruments held by consolidated investment products is presented in Note 20, "Consolidated Investment Products."
 
December 31, 2011
 
December 31, 2010
$ in millions
Footnote Reference
 
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
Cash and cash equivalents
 
 
727.4

 
727.4

 
740.5

 
740.5

Available for sale investments
4
 
63.5

 
63.5

 
100.0

 
100.0

Assets held for policyholders
 
 
1,243.5

 
1,243.5

 
1,295.4

 
1,295.4

Trading investments
4
 
187.5

 
187.5

 
180.6

 
180.6

Foreign time deposits*
4
 
32.2

 
32.2

 
28.2

 
28.2

Support agreements*
19,20
 
(1.0
)
 
(1.0
)
 
(2.0
)
 
(2.0
)
Policyholder payables
 
 
(1,243.5
)
 
(1,243.5
)
 
(1,295.4
)
 
(1,295.4
)
Financial instruments sold, not yet purchased
 
 
(1.0
)
 
(1.0
)
 
(0.7
)
 
(0.7
)
Derivative liabilities
 
 
—

 
—

 
(0.1
)
 
(0.1
)
Note Payable
 
 
(16.8
)
 
(16.8
)
 
(18.9
)
 
(18.9
)
Total debt*
9
 
(1,284.7
)
 
(1,307.5
)
 
(1,315.7
)
 
(1,339.3
)

____________

*
These financial instruments are not measured at fair value on a recurring basis. See the indicated footnotes for additional information about the carrying and fair values of these financial instruments. Foreign time deposits are measured at cost plus accrued interest, which approximates fair value.

A three-level valuation hierarchy exists for disclosure of fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

•
Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
•
Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
•
Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement.

An asset or liability's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

There are three types of valuation approaches: a market approach, which uses observable prices and other relevant information that is generated by market transactions involving identical or comparable assets or liabilities; an income approach, which uses valuation techniques to convert future amounts to a single, discounted present value amount; and a cost approach, which is based on the amount that currently would be required to replace the service capacity of an asset.

The following is a description of the valuation methodologies used for assets and liabilities measured at fair value on a recurring basis, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy.

Cash equivalents
Cash equivalents include cash investments in money market funds and time deposits. Cash investments in money market funds are valued under the market approach through the use of quoted market prices in an active market, which is the net asset value of the underlying funds, and are classified within level 1 of the valuation hierarchy.

Available-for-sale investments
Available-for-sale investments include amounts seeded into affiliated investment products, and investments in affiliated CLOs. Seed money is valued under the market approach through the use of quoted market prices available in an active market and is classified within level 1 of the valuation hierarchy; there is no modeling or additional information needed to arrive at the fair values of these investments. Seed money investments are investments held in Invesco managed funds with the purpose of providing capital to the funds during their development periods. CLOs are valued using an income approach through the use of certain observable and unobservable inputs. Due to current liquidity constraints within the market for CLO products that require the use of unobservable inputs, these investments are classified as level 3 within the valuation hierarchy.

Assets held for policyholders
Assets held for policyholders represent investments held by one of the company's subsidiaries, which is an insurance entity that was established to facilitate retirement savings plans in the U.K. The assets held for policyholders are accounted for at fair value pursuant to ASC Topic 944, “Financial Services - Insurance,” and are comprised primarily of affiliated unitized funds. The assets are measured at fair value under the market approach based on the quoted prices of the underlying funds in an active market and are classified within level 1 of the valuation hierarchy. The policyholder payables are indexed to the value of the assets held for policyholders.

Trading investments
Trading investments include investments held to hedge economically against costs the company incurs in connection with certain deferred compensation plans in which the company participates, as well as trading and investing activities in equity and debt securities entered into in its capacity as sponsor of UITs.

•
Investments related to deferred compensation plans
Investments related to deferred compensation plans are primarily invested in affiliated funds that are held to hedge economically current and non-current deferred compensation liabilities. Investments related to deferred compensation plans are valued under the market approach through the use of quoted prices in an active market and are classified within level 1 of the valuation hierarchy.

•
Unit Investment Trust ("UIT")-related equity and debt securities
At December 31, 2011, UIT-related equity and debt securities consisted of investments in corporate stock, UITs, and U.S. state and political subdivision securities. Each is discussed more fully below.

•
Corporate stock
The company temporarily holds investments in corporate stock for purposes of creating a UIT. Corporate stocks are valued under the market approach through use of quoted prices on an exchange. To the extent these securities are actively traded, valuation adjustments are not applied and they are categorized within level 1 of the valuation hierarchy; otherwise, they are categorized in level 2.

•
UITs
The company may hold units of its sponsored UITs at period-end for sale in the primary market or secondary market. Equity UITs are valued under the market approach through use of quoted prices on an exchange. Fixed income UITs are valued using recently executed transaction prices, market price quotations (where observable), bond spreads, or credit default swap spreads. The spread data used is for the same maturities as the underlying bonds. If the spread data does not reference the issuers, then data that references comparable issuers is used. When observable price quotations are not available, fair value is determined based on cash flow models with yield curves, bond or single name credit default spreads, and recovery rates based on collateral value as key inputs. Depending on the nature of the inputs, these investments are categorized as level 1, 2, or 3.

•
Municipal securities
Municipal securities are valued using recently executed transaction prices, market price quotations (where observable), bond spreads, or credit default swap spreads. The spread data used is for the same maturities as the underlying bonds. If the spread data does not reference the issuers, then data that references comparable issuers is used. When observable price quotations are not available, fair value is determined based on cash flow models with yield curves, bond or single name credit default spreads, and recovery rates based on collateral value as key inputs. Depending on the nature of the inputs, these investments are categorized as level 1, 2, or 3.

UIT-related financial instruments sold, not yet purchased, and derivative instruments
The company uses U.S. Treasury futures, which are types of derivative financial instruments, to hedge economically fixed income UIT inventory and securities in order to mitigate market risk. Open futures contracts are marked to market daily through earnings, which is recorded in the company's consolidated statement of income in other revenue, along with the mark-to-market on the underlying trading securities held. Fair values of derivative contracts in an asset position are included in other assets in the company's consolidated balance sheet. Fair values of derivative contracts in a liability position are included in other liabilities in the company's consolidated balance sheet. These derivative contracts are valued under the market approach through use of quoted prices in an active market and are classified within Level 1 of the valuation hierarchy. At December 31, 2011 there were 10 futures contracts with a notional value of $1.3 million (December 31, 2010: 76 open futures contracts with a notional value of $9.3 million). Additionally, to hedge economically the market risk associated with equity and debt securities and UITs temporarily held as trading investments, the company will hold short corporate stock, exchange-traded fund, or U.S. treasury security positions. These transactions are recorded as financial instruments sold, not yet purchased and are included in other liabilities in the company's consolidated balance sheet. To the extent these securities are actively traded, valuation adjustments are not applied and they are categorized in Level 1 of the fair value hierarchy; otherwise, they are categorized in Level 2.

Note payable
The note payable represents a payable linked to the aggregate amount of distributions proportional to Invesco's acquired ownership interest in two consolidated real estate funds. As the underlying investments in the funds are carried at fair value (and are disclosed as Level 3 assets in the fair value hierarchy table included in Note 20, "Consolidated Investment Products"), management elected the fair value option for the note payable in order to offset the fair value movements recognized from the funds and has recorded the note payable as a Level 3 liability. The fair value of the note payable represents its remaining principal balance adjusted for changes in equity of the funds that is attributable to the company's ownership interest in the funds.

The following table presents, for each of the hierarchy levels described above, the carrying value of the company's assets and liabilities, including major security type for equity and debt securities, which are measured at fair value on the face of the statement of financial position as of December 31, 2011.
 
As of December 31, 2011
$ in millions
Fair Value Measurements
 
Quoted Prices in Active Markets for Identical Assets
(Level 1)
 
Significant Other Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
Current assets:
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
257.7

 
257.7

 
—

 
—

Investments:*

 

 

 
 
Available-for-sale:

 

 

 
 
Seed money
63.5

 
63.5

 
—

 
—

Trading investments:

 

 

 
 
Investments related to deferred compensation plans
184.4

 
184.4

 
—

 
—

UIT-related equity and debt securities:

 

 

 
 
Corporate stock
1.1

 
1.1

 
—

 
—

UITs
0.9

 
0.9

 
—

 
—

Municipal securities
1.1

 
—

 
1.1

 
—

Assets held for policyholders
1,243.5

 
1,243.5

 
—

 
—

Total assets at fair value
1,752.2

 
1,751.1

 
1.1

 
—

Current liabilities:
 
 
 
 
 
 
 
Policyholder payables
(1,243.5
)
 
(1,243.5
)
 
—

 
—

UIT-related financial instruments sold, not yet purchased:

 

 

 
 
Corporate equities
(1.0
)
 
(1.0
)
 
—

 
—

Note payable
(16.8
)
 
—

 
—

 
(16.8
)
Total liabilities at fair value
(1,261.3
)
 
(1,244.5
)
 
—

 
(16.8
)

*
Current foreign time deposits of $32.2 million and other current investments of $0.5 million are excluded from this table. Other non-current equity and cost method investments of $193.1 million and $7.7 million, respectively, are also excluded from this table. These investments are not measured at fair value, in accordance with applicable accounting standards.
The following table presents, for each of the hierarchy levels described above, the carrying value of the company's assets and liabilities that are measured at fair value as of December 31, 2010:
 
As of December 31, 2010
$ in millions
Fair Value Measurements
 
Quoted Prices in Active Markets for Identical Assets
(Level 1)
 
Significant Other Observable Inputs (Level 2)
 
Significant Unobservable Inputs (Level 3)
Current assets:
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
316.4

 
316.4

 
—

 
—

Investments:*
 

 
 

 
 

 
 

Available-for-sale:
 

 
 

 
 

 
 

Seed money
99.5

 
99.5

 
—

 
—

Trading investments:
 

 
 

 
 

 
 

Investments related to deferred compensation plans
165.5

 
165.5

 
—

 
—

UIT-related equity and debt securities:
 

 
 

 
 

 
 

Corporate stock
1.2

 
1.2

 
—

 
—

UITs
4.0

 
4.0

 
—

 
—

Municipal securities
9.9

 
—

 
9.9

 
—

Assets held for policyholders
1,295.4

 
1,295.4

 
—

 
—

Total current assets
1,891.9

 
1,882.0

 
9.9

 
—

Non-current assets:
 

 
 

 
 

 
 

Investments - available-for-sale*:
 

 
 

 
 

 
 

CLOs
0.5

 
—

 
—

 
0.5

Total assets at fair value
1,892.4

 
1,882.0

 
9.9

 
0.5

Current liabilities:
 

 
 

 
 

 
 

Policyholder payables
(1,295.4
)
 
(1,295.4
)
 
—

 
—

UIT-related financial instruments sold, not yet purchased:
 

 
 

 
 

 
 

Corporate equities
(0.7
)
 
(0.7
)
 
—

 
—

UIT-related derivative liabilities
(0.1
)
 
(0.1
)
 
—

 
—

Non-current liabilities:
 

 
 

 
 

 
 

Note payable
(18.9
)
 
—

 
—

 
(18.9
)
Total liabilities at fair value
(1,315.1
)
 
(1,296.2
)
 
—

 
(18.9
)

____________

*
Current foreign time deposits of $28.2 million and other current investments of $0.5 million are excluded from this table. Other non-current equity and cost method investments of $156.9 million and $7.0 million, respectively, are also excluded from this table. These investments are not measured at fair value, in accordance with applicable accounting standards.

The following table shows a reconciliation of the beginning and ending fair value measurements for level 3 assets and liabilities during the year ending December 31, 2011 and December 31, 2010, which are valued using significant unobservable inputs:
 
For the year ended December 31, 2011
 
For the year ended December 31, 2010
$ in millions
CLO Investment
 
Note Payable
 
CLO Investment
Beginning balance
0.5

 
(18.9
)
 
17.9

Adoption of guidance now encompassed in ASC Topic 810*
—

 
—

 
(17.4
)
Beginning balance, as adjusted
0.5

 
(18.9
)
 
0.5

Net unrealized gains and losses included in accumulated other comprehensive income/(loss)**
—

 
—

 
0.1

Foreign exchange movements included in other expenses
—

 
(0.8
)
 
—

Purchases, sales, issuances, and settlements, net***
(0.5
)
 
2.9

 
(0.1
)
Ending balance
—

 
(16.8
)
 
0.5


____________

*
The company adopted guidance now encompassed in ASC Topic 810 on January 1, 2010, resulting in the consolidation of CLOs for which the company has an underlying investment of $50.4 million at December 31, 2011 (before consolidation). The adjustment of $17.4 million in the table above reflects the elimination of the company's equity interest upon adoption. In accordance with the standard, prior periods have not been restated to reflect the consolidation of these CLOs.
**
There were no net unrealized gains and losses included in accumulated other comprehensive income/(loss) for the year ended December 31, 2011 as assets was sold in the year ended December 31, 2011 (year ended December 31, 2010: $0.1 million attributed to the change in unrealized gains and losses related to assets still held at December 31, 2010).
***
Prior to the adoption of guidance included in ASU 2010-06, discussed in Note 1, “Accounting Policies,” purchases, sales, issuances, and settlements were presented net. For the year ended December 31, 2011 there was $0.1 million of return of capital and a sale of $0.4 million related to the CLO investment (year ended December 31, 2010: $0.1 million return of capital activity). For the year ended December 31, 2011, there was $2.9 million in settlement activity related to the note payable.