Bank of America 2008 Annual Report Download - page 123

On September 12, 2008, the FASB issued FSP No. 133-1 and FIN
45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An
Amendment of FASB Statement No. 133 and FASB Interpretation No. 45;
and Clarification of the Effective Date of FASB Statement No. 161” (FSP
133-1). FSP 133-1 requires expanded disclosures about credit derivatives
and guarantees. The expanded disclosure requirements for FSP 133-1
were effective for the Corporation’s financial statements for the year
ending December 31, 2008 and are included in Note 4 – Derivatives to
the Consolidated Financial Statements. The adoption of FSP 133-1 did
not impact the Corporation’s financial condition and results of operations.
On June 16, 2008, the FASB issued FSP EITF 03-6-1, “Determining
Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities” (FSP 03-6-1). FSP 03-6-1 defines unvested
share-based payment awards that contain nonforfeitable rights to divi-
dends as participating securities that should be included in computing
earnings per share (EPS) using the two-class method under SFAS
No. 128, “Earnings per Share.” FSP 03-6-1 is effective for the Corpo-
ration’s financial statements for the year beginning on January 1, 2009.
Additionally, all prior-period EPS data shall be adjusted retrospectively.
The adoption of FSP 03-6-1 will not have a material impact on the Corpo-
ration’s financial condition and results of operations.
On March 19, 2008, the FASB issued SFAS No. 161, “Disclosures
about Derivative Instruments and Hedging Activities” (SFAS 161) which
requires expanded qualitative, quantitative and credit-risk disclosures
about derivatives and hedging activities and their effects on the Corpo-
ration’s financial position, financial performance and cash flows. SFAS
161 is effective for the Corporation’s financial statements for the year
beginning on January 1, 2009. The adoption of SFAS 161 will not impact
the Corporation’s financial condition and results of operations.
On February 20, 2008, the FASB issued FSP No. FAS 140-3,
“Accounting for Transfers of Financial Assets and Repurchase Financing
Transactions” (FSP 140-3). FSP 140-3 requires that an initial transfer of a
financial asset and a repurchase financing that was entered into con-
temporaneously with, or in contemplation of, the initial transfer be eval-
uated together as a linked transaction under SFAS 140, unless certain
criteria are met. FSP 140-3 is effective for the Corporation’s financial
statements for the year beginning on January 1, 2009. The adoption of
FSP 140-3 is not expected to have a material impact on the Corporation’s
financial condition and results of operations.
On January 1, 2008, the Corporation adopted the Securities and
Exchange Commission’s (SEC) Staff Accounting Bulletin (SAB) No. 109,
“Written Loan Commitments Recorded at Fair Value Through Earnings”
(SAB 109) for loan commitments measured at fair value through earnings
which were issued or modified since adoption on a prospective basis.
SAB 109 requires that the expected net future cash flows related to serv-
icing of a loan be included in the measurement of all written loan
commitments that are accounted for at fair value through earnings. The
adoption of SAB 109 generally has resulted in higher fair values being
recorded upon initial recognition of derivative interest rate lock commit-
ments (IRLCs).
On January 1, 2008, the Corporation adopted EITF consensus on
Issue No. 06-11, “Accounting for Income Tax Benefits of Dividends on
Share-Based Payment Awards” (EITF 06-11). EITF 06-11 requires on a
prospective basis that the tax benefit related to dividend equivalents paid
on restricted stock and restricted stock units which are expected to vest
be recorded as an increase to additional paid-in capital. The adoption of
EITF 06-11 did not have a material impact on the Corporation’s financial
condition and results of operations.
On December 4, 2007, the FASB issued SFAS No. 141 (revised
2007), “Business Combinations” (SFAS 141R). SFAS 141R modifies the
accounting for business combinations and requires, with limited
exceptions, the acquirer in a business combination to recognize 100
percent of the assets acquired, liabilities assumed, and any non-
controlling interest in the acquiree at the acquisition-date fair value. In
addition, SFAS 141R requires the expensing of acquisition-related trans-
action and restructuring costs, and certain contingent assets and
liabilities acquired, as well as contingent consideration, to be recognized
at fair value. SFAS 141R also modifies the accounting for certain
acquired income tax assets and liabilities. SFAS 141R is effective for new
acquisitions consummated on or after January 1, 2009. The Corporation
applied SFAS 141R to its January 1, 2009 acquisition of Merrill Lynch.
On December 4, 2007, the FASB also issued SFAS No. 160,
“Noncontrolling Interests in Consolidated Financial Statements” (SFAS
160). SFAS 160 requires all entities to report noncontrolling (i.e., minor-
ity) interests in subsidiaries as equity in the Consolidated Financial
Statements and to account for transactions between an entity and non-
controlling owners as equity transactions if the parent retains its control-
ling financial interest in the subsidiary. SFAS 160 also requires expanded
disclosure that distinguishes between the interests of the controlling
owners and the interests of the noncontrolling owners of a subsidiary.
SFAS 160 is effective for the Corporation’s financial statements for the
year beginning on January 1, 2009. The adoption of SFAS 160 is not
expected to have a material impact on the Corporation’s financial con-
dition and results of operations.
On January 1, 2007, the Corporation adopted FSP No. FAS 13-2,
“Accounting for a Change or Projected Change in the Timing of Cash
Flows Relating to Income Taxes Generated by a Leveraged Lease Trans-
action” (FSP 13-2). The principal provision of FSP 13-2 is the requirement
that a lessor recalculate the recognition of lease income when there is a
change in the estimated timing of the cash flows relating to income taxes
generated by such leveraged lease. The adoption of FSP 13-2 reduced the
beginning balance of retained earnings as of January 1, 2007 by $1.4
billion, net-of-tax, with a corresponding offset decreasing the net invest-
ment in leveraged leases recorded as part of loans and leases.
Cash and Cash Equivalents
Cash on hand, cash items in the process of collection, and amounts due
from correspondent banks and the Federal Reserve Bank are included in
cash and cash equivalents.
Securities Purchased Under Agreements to Resell
and Securities Sold under Agreements to
Repurchase
Securities purchased under agreements to resell and securities sold
under agreements to repurchase are treated as collateralized financing
transactions. These agreements are recorded at the amounts at which
the securities were acquired or sold plus accrued interest, except for
certain structured reverse repurchase agreements for which the Corpo-
ration has elected the fair value option. For more information on struc-
tured reverse repurchase agreements for which the Corporation has
elected the fair value option, see Note 19 – Fair Value Disclosures to the
Consolidated Financial Statements. The Corporation’s policy is to obtain
the use of securities purchased under agreements to resell. The market
value of the underlying securities, including accrued interest, which
collateralize the related receivable on agreements to resell, is monitored.
The Corporation may require counterparties to deposit additional
collateral or return collateral pledged, when appropriate.
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