In 2010, in accordance with the accounting standard regarding the accounting and disclosure of income taxes in interim  periods, we used an annualized effective tax rate to compute our tax expense each quarter . We adjusted this annualized effective  tax rate each quarter by the following discrete items: (i) net gains or losses resulting from the change in fair value of our  derivatives and other financial instruments; (ii) investment gains or losses; (iii) the liabilities recorded under the accounting  standard regarding accounting for uncertainty in income taxes; and (iv) prior year provision-to-filed tax return adjustments.  Given the impact on our pre-tax results of net gains or losses resulting from our derivative transactions and our investment  portfolio and the continued uncertainty around our ability to rely on short-term financial projections, which directly af fects our  ability to estimate an effective tax rate for the full year , in 2012 and 2011, we booked our income tax expense (benefit) in  interim periods based on actual results of operations. In July 2012, the FASB issued a new accounting standard update that simplifies the impairment test for indefinite-lived  intangible assets other than goodwill. The new guidance gives the option to first assess qualitative factors to determine if it is  more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount as a basis for  determining whether it is necessary to perform a quantitative valuation test.  The new standard is effective for fiscal years, and  interim periods within those fiscal years, beginning on or after September 15, 2012.  We do not anticipate that the adoption of  this update will have a significant impact on our financial position, results of operations or cash flows. In June 2011, the FASB issued an update to the accounting standard regarding comprehensive income.  This update  eliminates the prior presentation options related to comprehensive income and provides an entity with the option to present the  components of net income, other comprehensive income (“OCI”) and total comprehensive income, either in a single continuous  statement of comprehensive income or in two separate but consecutive statements.  We adopted this update effective January 1,  2012, and elected to present the components of net income, OCI and total comprehensive income in two separate but  consecutive statements. Regardless of which option an entity chooses, the entity will be required to present, on the face of the  consolidated financial statements, reclassification adjustments for items that are reclassified from OCI to net income in the  statements where the components of net income and the components of OCI are presented. In December 201 1, the FASB  deferred the effective date for the requirement to present reclassification adjustments on the face of the consolidated financial  statements for the reclassification of items out of comprehensive income to net income. In October 2010, the FASB issued an update to the accounting standard regarding accounting for costs associated with  acquiring or renewing insurance contracts.  This update was effective for fiscal years beginning after December 15, 201 1 and  redefines acquisition costs as costs that are related directly to the successful acquisition of new , or the renewal of existing,  insurance contracts. We have adopted this update on a prospective basis as of January 1, 2012. Previously , acquisition costs  were defined as costs that vary with and are primarily related to the acquisition of insurance contracts.  The effect of this revised  definition of acquisition costs will result in additional expenses in our mortgage insurance business being char ged to earnings  when incurred, rather than being deferred.  There is no change to the amortization requirements due to this update.  This adoption  did not impact the financial guaranty business as we have adopted the update prospectively and are not deferring any  acquisition costs. The implementation of this new guidance has materially reduced the amount of policy acquisition costs that  we defer associated with acquiring new mortgage insurance contracts.  The lower amount of acquisition costs deferred will  result in decreased amortization expense over time, which should partially of fset the impact to our results of operations from the  additional expenses charged to income when incurred at the origination of an insurance contract.  While the timing of when  certain costs are reflected in our results of operations will change as a result of the adoption of this update, there will be no  effect on the total acquisition costs recognized over time or on our cash flows. For the year ended  December 31, 2012, $20.5  million was deferred as acquisition costs under the update. Under our previous method of accounting for acquisition costs,  $39.6 million would have been deferred as acquisition costs for the year ended  December 31, 2012. Recent Accounting Pronouncements 156