Bank of America 2005 Annual Report Download - page 202

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
There were no changes in or disagreements with accountants on accounting and financial disclosure.
Item 9A. CONTROLS AND PROCEDURES
(a) Restatement
As a result of a recent interpretation on the “short cut” method of accounting for derivatives as hedges under of
SFAS 133, the Corporation undertook additional review and testing related to the remediation of a significant deficiency
outstanding at December 31, 2004 which had been previously reported to the Audit Committee. As a result of that
review and testing, management identified additional deficiencies in the Corporation’s processes and procedures related
to the accounting treatment of derivative transactions used as hedges against changes in interest rates and foreign
currency values.
After initial discussions with the Audit Committee Chair, the Audit Committee held a meeting on February 15, 2006
to review with management the potential impact of these matters. After completing further analysis, management
recommended to the Audit Committee, at a follow-up meeting held on February 21, 2006, that previously reported
financial results be restated to eliminate hedge accounting for certain transactions. The Audit Committee agreed with
management’s recommendation. In light of the restatement, the previously reported financial statements for the full
year 2002 as well as the quarterly and annual periods in 2003, 2004, and 2005 should no longer be relied upon.
(b) Evaluation of Disclosure Controls and Procedures
In connection with the restatement, under the direction of our Chief Executive Officer and Chief Financial Officer,
we reevaluated our disclosure controls and procedures. As a result we determined that a deficiency in processes and
procedures over financial reporting of derivatives and hedging originally classified as a significant deficiency at
December 31, 2004 should have been classified as a material weakness at December 31, 2004. Solely as a result of this
material weakness, we concluded that our disclosure controls and procedures were not effective as of March 31, 2005,
June 30, 2005, and September 30, 2005.
(c) Remediation of Material Weakness in Internal Control
We believe that we have fully remediated the material weakness in our internal control over financial reporting
with respect to accounting for derivative transactions used as hedges as of December 31, 2005. The remedial actions
included:
• implementing additional management and oversight controls to review and approve hedging strategies and related
documentation to ensure hedge accounting is appropriately applied with respect to SFAS 133;
• discontinuing practices and processes where sustainable controls did not exist and automating other critical
functions within the process; and
• retesting our internal financial controls with respect to the deficiencies related to the material weakness to ensure
they are operating effectively to ensure compliance with SFAS 133.
In connection with this report, under the direction of our Chief Executive Officer and Chief Financial Officer, we
have evaluated our disclosure controls and procedures currently in effect, including the remedial actions discussed
above, and we have concluded that, as of December 31, 2005, our disclosure controls and procedures are effective.
See Report of Management on page 87 for management’s report on the Corporation’s internal control over financial
reporting which is incorporated herein by reference.
Except for the remediation of the material weakness discussed above, there was no change in our internal control
over financial reporting during the quarter ended December 31, 2005, that materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
Item 9B. OTHER INFORMATION
None
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