Bank of America 2002 Annual Report Download - page 94

92 BANK OF AMERICA 2002
Amortization expense on core deposit intangibles and other intangibles
was $218 million, $216 million and $229 million in 2002, 2001 and 2000,
respectively. The Corporation estimates that aggregate amortization
expense will be $212 million for 2003, $209 million for 2004, $208 mil-
lion for 2005, $207 million for 2006 and $118 million for 2007.
The gross carrying value and accumulated amortization related to core deposit intangibles and other intangibles at December 31, 2002 and
2001 are presented below:
December 31, 2002 December 31, 2001
Gross Carrying Accumulated Gross Carrying Accumulated
(Dollars in millions) Value Amortization Value Amortization
Core deposit intangibles $ 1,495 $ 726 $ 1,495 $ 566
Other intangibles 757 431 730 365
Total $ 2,252 $ 1,157 $ 2,225 $ 931
Variable Interest Entities
In January 2003, the FASB issued a new rule that addresses off-
balance sheet financing entities. As a result, the Corporation expects
that it will have to consolidate its multi-seller asset backed conduits
beginning in the third quarter of 2003, as required by the rule. As of
December 31, 2002, the assets of these entities were approximately
$25.0 billion. The actual amount that will be consolidated is depend-
ent on actions taken by the Corporation and its customers between
December 31, 2002 and the third quarter of 2003. Management is
assessing alternatives with regards to these entities including restruc-
turing the entities and/or alternative sources of cost-efficient funding
for the Corporation’s customers and expects that the amount of assets
consolidated will be less than the $25.0 billion due to these actions
and those of its customers. Revenues from administration, liquidity,
letters of credit and other services provided to these entities were
approximately $121 million in 2002 and $125 million in 2001. The new
rule requires that for entities to be consolidated that those assets be
initially recorded at their carrying amounts at the date the require-
ments of the new rule first apply. If determining carrying amounts as
required is impractical, then the assets are to be measured at fair
value the first date the new rule applies. Any difference between the
net amount added to the Corporation’s balance sheet and the amount
of any previously recognized interest in the newly consolidated entity
shall be recognized as the cumulative effect of an accounting change.
Had the Corporation adopted the rule in 2002, there would have been
no material impact to net income. See Note 1 of the consolidated finan-
cial statements for a discussion regarding management’s estimated
impact of the new rule in 2003. At December 31, 2002, the
Corporation’s liquidity and letter of credit exposure associated with
the multi-seller conduits administered by the Corporation was approx-
imately $21.3 billion. Management does not believe losses resulting
from its administration of these conduits will be material.
Additionally, the Corporation has significant involvement with
other VIEs that it will not likely consolidate because it is not consid-
ered the primary beneficiary. In all cases, the Corporation does not
absorb the majority of the entities’ losses nor does it receive a major-
ity of the entities’ expected residual returns, or both. These entities
facilitate client transactions, and the Corporation functions as
administrator for all of these and provides either liquidity and letters
of credit or derivatives to the VIE. Total assets of these entities at
December 31, 2002 were approximately $11.1 billion; revenues
associated with administration, liquidity, letters of credit and other
services were approximately $341 million in 2002. At December 31,
2002, the Corporation’s loss exposure associated with these VIEs was
approximately $5.1 billion. Management does not believe losses
resulting from its involvement with these entities will be material.
The Corporation consolidates certain SPEs under current account-
ing guidance when it believes that consolidation is appropriate. At
December 31, 2002, assets of consolidated SPEs were approximately
$2.9 billion.
See Note 1 for additional discussion of special purpose financ-
ing entities.
NOTE 9 Goodwill and Other Intangibles
In accordance with SFAS 142, no goodwill amortization was recorded in
2002. Goodwill amortization expense in 2001 was $662 million. Net
income in 2001 was $6.8 billion or $4.26 per share ($4.18 per share
diluted). Net income adjusted to exclude goodwill amortization expense
would have been $7.4 billion or $4.64 per share ($4.56 per share
diluted) in 2001. The impact of goodwill amortization on net income in
2001 was $616 million or $0.38 per share (basic and diluted). Goodwill
amortization expense in 2000 was $635 million. Net income in 2000 was
$7.5 billion or $4.56 per share ($4.52 per share diluted). Net income
adjusted to exclude goodwill amortization expense would have been
$8.1 billion or $4.93 per share ($4.88 per share diluted) in 2000. The
impact of goodwill amortization on net income in 2000 was $602 million
or $0.37 per share ($0.36 per share diluted).
At December 31, 2002 and 2001, goodwill was $7.7 billion in
Consumer and Commercial Banking, $2.0 billion in Global Corporate
and Investment Banking and $134 million in Equity Investments.
Goodwill in Asset Management at December 31, 2002 and 2001 was
$1.5 billion and $943 million, respectively, reflecting a $550 million
addition representing final contingent consideration in connection
with the acquisition of the remaining 50 percent of Marsico Capital
Management, LLC in 2001 for $1.1 billion. All conditions related to
this contingent consideration have been met.