Bank of America 2010 Annual Report Download - page 158

Condensed Statement of Net Assets Acquired
The following condensed statement of net assets acquired reflects the values
assigned to Merrill Lynch’s net assets as of the acquisition date.
(Dollars in billions) January 1, 2009
Assets
Federal funds sold and securities borrowed or purchased under
agreements to resell $138.8
Trading account assets 87.7
Derivative assets 96.4
Investment securities 70.5
Loans and leases 55.9
Intangible assets 5.4
Other assets 195.3
Total assets $650.0
Liabilities
Deposits $ 98.1
Federal funds purchased and securities loaned or sold under
agreements to repurchase 111.6
Trading account liabilities 18.1
Derivative liabilities 72.0
Commercial paper and other short-term borrowings 37.9
Accrued expenses and other liabilities 99.5
Long-term debt 188.9
Total liabilities 626.1
Fair value of net assets acquired $ 23.9
Contingencies
The fair value of net assets acquired includes certain contingent liabilities that
were recorded as of the acquisition date. Merrill Lynch has been named as a
defendant in various pending legal actions and proceedings arising in con-
nection with its activities as a global diversified financial services institution.
Some of these legal actions and proceedings include claims for substantial
compensatory and/or punitive damages or claims for indeterminate amounts
of damages. Merrill Lynch is also involved in investigations and/or proceed-
ings by governmental and self-regulatory agencies. Due to the number of
variables and assumptions involved in assessing the possible outcome of
these legal actions, sufficient information did not exist as of the acquisition
date to reasonably estimate the fair value of these contingent liabilities. As
such, these contingences have been measured in accordance with applicable
accounting guidance which states that a loss is recognized when it is probable
of occurring and the loss amount can be reasonably estimated. For further
information, see Note 14 – Commitments and Contingencies.
Merger and Restructuring Charges and Reserves
Merger and restructuring charges are recorded in the Consolidated Statement
of Income and include incremental costs to integrate the operations of the
Corporation and its recent acquisitions. These charges represent costs
associated with these one-time activities and do not represent ongoing costs
of the fully integrated combined organization. On January 1, 2009, the
Corporation adopted new accounting guidance on business combinations,
on a prospective basis, that requires that acquisition-related transaction and
restructuring costs be charged to expense as incurred. Previously, these
expenses were recorded as an adjustment to goodwill.
The table below presents severance and employee-related charges, sys-
tems integrations and related charges, and other merger-related charges.
(Dollars in millions) 2010 2009 2008
Severance and employee-related charges $455 $1,351 $138
Systems integrations and related charges
1,137 1,155 640
Other
228 215 157
Total merger and restructuring charges $1,820 $2,721 $935
Included for 2010 are merger-related charges of $1.6 billion related to the
Merrill Lynch acquisition and $202 million related to the July 1, 2008 acqui-
sition of Countrywide Financial Corporation (Countrywide). Included for 2009
are merger-related charges of $1.8 billion related to the Merrill Lynch acqui-
sition, $843 million related to the Countrywide acquisition and $97 million
related to earlier acquisitions. Included for 2008 are merger-related charges
of $205 million related to the Countrywide acquisition and $730 million
related to earlier acquisitions.
During 2010, $1.6 billion in merger-related charges for the Merrill Lynch
acquisition included $426 million for severance and other employee-related
costs, $975 million for systems integration costs and $217 million in other
merger-related costs. In 2009, the $1.8 billion in merger-related charges for
the Merrill Lynch acquisition included $1.2 billion for severance and other
employee-related costs, $480 million for systems integration costs and
$129 million in other merger-related costs.
The table below presents the changes in exit cost and restructuring
reserves for 2010 and 2009. Exit cost reserves were established in purchase
accounting resulting in an increase in goodwill. Restructuring reserves are
established by a charge to merger and restructuring charges, and the re-
structuring charges are included in the total merger and restructuring charges
in the table above. Exit costs were not recorded in purchase accounting for the
Merrill Lynch acquisition in accordance with new accounting guidance on
business combinations which was effective January 1, 2009.
(Dollars in millions) 2010 2009 2010 2009
Exit Cost
Reserves
Restructuring
Reserves
Balance, January 1 $112 $523 $403 $86
Exit costs and restructuring charges:
Merrill Lynch
n/a n/a 375 949
Countrywide
(18) – 54 191
Other
(9) (24) – (6)
Cash payments and other
(70) (387) (496) (817)
Balance, December 31 $15 $112 $336 $403
n/a = not applicable
At December 31, 2009, there were $403 million of restructuring reserves
related to the Merrill Lynch and Countrywide acquisitions for severance and
other employee-related costs. During 2010, $429 million was added to the
restructuring reserves related to severance and other employee-related costs
primarily associated with the Merrill Lynch acquisition. Cash payments and
other of $496 million during 2010 were related to severance and other
employee-related costs primarily associated with the Merrill Lynch acquisition.
Payments associated with the Countrywide acquisition are expected to con-
tinue into 2011, while Merrill Lynch related payments are anticipated to
continue into 2012. At December 31, 2010, restructuring reserves of
$336 million related principally to Merrill Lynch.
156 Bank of America 2010