349 Glossary  Acquisition date  is the date on which the acquirer effectively  obtains control of the acquiree. In most cases this includes at  least the transfer of risks and rewards related to the acquired  business or assets/liabilities. Actuarial funding  enables a life insurance company to reduce  the size of the unit reserves it holds for unit linked business to  reflect some or all of the unit-linked charges it expects to receive  in the future from the units nominally allocated. Actuarial  funding is used on those contracts that have surrender penalties  and the company will hold a minimum of the surrender value at  all times. Actuarial gains and losses  relate to the accounting for  post-employment benefit plans. They comprise the effects of  experience adjustments and changes in assumptions used to  determine the cost of a plan. Alt-A mortgages  relates to a type of US residential mortgage  which are securitized home equity loans. Typical Alt-A borrower  has a credit score high enough to obtain an: ”A” standing. Alt- A  mortgages are primarily backed by loans with fixed interest rates  for the entire term of the loan. Amortized cost  is the amount at which the financial asset or  liability is measured at initial recognition minus principal  repayments, plus or minus the cumulative amortization using the  effective interest rate method of any difference between that  initial amount and the maturity amount and minus any reduction  (directly or through the use of an allowance account) for  impairment or uncollectability. Asset Backed Securities (ABS)  are securities whose value and  income payments are derived from and collateralized (or  “backed”) by a specified pool of underlying assets. Assets held by long-term employee benefit funds  are part of  plan assets. These are assets (other than non-transferable  financial instruments issued by the reporting entity) that: Bifurcation  is the measurement and presentation of embedded  derivatives separate from the host contracts, as if they were  stand-alone derivative financial instruments. Binomial option pricing model  uses a binomial lattice that  represents possible paths that might be followed by the  underlying asset’s price over the life of the option, for a given  number of time steps between valuation date and option  expiration. Each node in the lattice represents a possible price of  the underlying asset, at a particular point in time. The valuation  process is iterative; it starts at each final node and then works  backwards through the lattice to the first node, which is the  valuation date, where the calculated result is the value of the  option. Business combination  is the bringing together of separate  entities or operations of entities into one reporting entity. This  can be realized through a purchase transaction or by means of a  merger. A business combination involving entities (or operations  of entities) under common control is a business combination in  which all of the combining entities (or operations of entities)  ultimately are controlled by the same party or parties both  before and after the combination, and that control is not  transitory. Capitalization  is the recognition of a cost as part of the cost of  an asset on the statement of financial position. Cash generating unit  is the smallest identifiable group of assets  that generates cash inflows that are largely independent of the  cash inflows from other assets or groups of assets. Cedant  is the policyholder under a reinsurance contract. Claims settlement expenses  are costs incurred in settling a  claim. These costs include internal administration and payout  costs, but also such items as attorney’s fees and investigation  expenses. Collateral  is an asset pledged by a borrower to secure a loan and  is subject to seizure in the case of default. Collateralized Debt Obligation (CDO)  isa type of asset-backed  security which provides investors exposure to the credit risk of a  pool of fixed income assets. Collateralized Loan Obligation (CLO)  is a type of CDO which is  backed primarily by leveraged loans. Commercial Mortgage Backed Securities (CMBS)  is a type of  mortgage-backed security that is secured by the loan on a  commercial property. Compound financial instruments  are financial instruments  that, from the issuer’s perspective, contain both a liability and an  equity element. ■ Are held by an entity that is legally separate from the  reporting entity and exists solely to pay or fund employee  benefits; and ■ Are available to be used only to pay or fund employee  benefits and are not available to the reporting entity’s own  creditors. 