BB&T 2009 Annual Report Download - page 95

BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
BB&T accounts for unconsolidated partnership investments using the equity method of accounting. In
addition to affordable housing partnerships, which represent the majority of unconsolidated investments in
variable interest entities, BB&T also has investments and future funding commitments to venture capital and
other entities. The maximum potential exposure to losses relative to investments in variable interest entities is
generally limited to the sum of the outstanding balance, future funding commitments and any related loans to the
entity. Loans to these entities are underwritten in substantially the same manner as are other loans and are
generally secured.
BB&T has investments in certain entities for which BB&T does not have the controlling interest. For these
investments, the Company records its interest using the equity method with its portion of income or loss being
recorded in other noninterest income in the Consolidated Statements of Income. BB&T periodically evaluates
these investments for impairment.
Reclassifications
BB&T adopted new guidance related to consolidations on January 1, 2009. This guidance requires that a
non-controlling interest in a subsidiary be accounted for as equity in the consolidated balance sheet and that net
income include the amounts for both the parent and the non-controlling interest, with a separate amount
presented in the statement of income for the non-controlling interest’s share of net income. This guidance also
expands the disclosure requirements and provides guidance on how to account for changes in the ownership
interest of a subsidiary. In accordance with this guidance, BB&T retrospectively applied the presentation and
disclosure provisions for all periods presented. The amounts reclassified in connection with the adoption of this
guidance were not material to the consolidated financial statements.
In certain other instances, amounts reported in prior years’ consolidated financial statements have been
reclassified to conform to the current presentation. Such reclassifications had no effect on previously reported
cash flows, shareholders’ equity or net income.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial
statements and the reported amounts of revenues and expenses during the reporting periods. Actual results
could differ from those estimates. Material estimates that are particularly susceptible to significant change
include the determination of the allowance for loan and lease losses and the reserve for unfunded lending
commitments, determination of fair value for financial instruments, valuation of goodwill, intangible assets and
other purchase accounting related adjustments, benefit plan obligations and expenses, and tax assets, liabilities
and expense.
Business Combinations
BB&T accounts for all business combinations using the acquisition method of accounting. Under this method
of accounting, the accounts of an acquired entity are included with the acquirer’s accounts as of the date of
acquisition with any excess of purchase price over the fair value of the net assets acquired (including identifiable
intangibles) capitalized as goodwill.
To consummate an acquisition, BB&T typically issues common stock and/or pays cash, depending on the
terms of the acquisition agreement. For acquisitions that occurred prior to January 1, 2009, the value of common
shares issued was determined based on the market price of the securities issued over a reasonable period of time,
not to exceed three days before and three days after the measurement date. For acquisitions occurring after
December 31, 2008, the value of common shares issued is based upon the market price of the stock as of the
closing of the acquisition.
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