BB&T 2012 Annual Report Download - page 108

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Reclassifications
In certain instances, amounts reported in prior years’ consolidated financial statements have been reclassified to conform to
the current year 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 GAAP 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 ACL, 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. The value of common shares issued is determined based upon the market price of the stock as of the
closing of the acquisition.
In connection with mergers and acquisitions, BB&T may issue options to purchase shares of its common stock in exchange
for options to purchase shares of the acquired entities that are outstanding at the time the merger is completed. To the extent
vested, the options are considered to be part of the purchase price paid. There is no change in the aggregate intrinsic value of
the options issued compared to the intrinsic value of the options held immediately before the exchange, nor does the ratio of
the exercise price per option to the market value per share change.
Cash and Cash Equivalents
Cash and cash equivalents include cash and due from banks, interest-bearing deposits with banks, Federal funds sold and
securities purchased under resale agreements or similar arrangements. Cash and cash equivalents have maturities of three
months or less. Accordingly, the carrying amount of such instruments is considered a reasonable estimate of fair value.
Securities
BB&T classifies marketable investment securities as held to maturity, available for sale or trading. Interest income and
dividends on securities are recognized in interest income on an accrual basis. Premiums and discounts on debt securities are
amortized as an adjustment to interest income using the interest method.
Debt securities are classified as held to maturity where BB&T has both the intent and ability to hold the securities to
maturity. These securities are reported at amortized cost.
Debt securities, which may be sold to meet liquidity needs arising from unanticipated deposit and loan fluctuations, changes
in regulatory capital requirements, or unforeseen changes in market conditions, are classified as available for sale. Securities
available for sale are reported at estimated fair value, with unrealized gains and losses reported in AOCI, net of deferred
income taxes, in the shareholders’ equity section of the Consolidated Balance Sheets. Gains or losses realized from the sale
of securities available for sale are determined by specific identification and are included in noninterest income.
BB&T evaluates each held to maturity and available for sale security in a loss position for OTTI. BB&T considers such
factors as the length of time and the extent to which the market value has been below amortized cost, long term expectations
and recent experience regarding principal and interest payments, BB&T’ s intent to sell and whether it is more likely than not
that the Company would be required to sell those securities before the anticipated recovery of the amortized cost basis. The
credit component of an OTTI loss is recognized in earnings and the non-credit component is recognized in AOCI in
situations where BB&T does not intend to sell the security and it is more-likely-than-not that BB&T will not be required to
sell the security prior to recovery.
Trading account securities, which include both debt and equity securities, are reported at fair value. Unrealized market value
adjustments, fees, and realized gains or losses from trading account activities (determined by specific identification) are