Bank of America 2011 Annual Report Download - page 260

258 Bank of America 2011
Loans Held-for-Sale
The Corporation elected to account for residential mortgage LHFS,
commercial mortgage LHFS and other LHFS under the fair value
option with interest income on these LHFS recorded in other
interest income. The changes in fair value are largely offset by
hedging activities. An immaterial portion of the changes in fair
value for these loans was attributable to changes in borrower-
specific credit risk. Election of the fair value option allows the
Corporation to reduce the accounting volatility that would
otherwise result from the asymmetry created by accounting for the
financial instruments at historical cost and the economic hedges
at fair value. The Corporation has not elected to account for other
LHFS under the fair value option primarily because these loans
are floating-rate loans that are not economically hedged using
derivative instruments.
Loans Reported as Trading Account Assets
The Corporation elected to account for certain loans that are risk-
managed on a fair value basis under the fair value option. An
immaterial portion of the changes in fair value for these loans was
attributable to changes in borrower-specific credit risk.
Other Assets
The Corporation elected to account for certain private equity
investments that are not in an investment company under the fair
value option as this measurement basis is consistent with
applicable accounting guidance for similar investments that are
in an investment company.
Securities Financing Agreements
The Corporation elected to account for certain securities financing
agreements, including resale and repurchase agreements, under
the fair value option based on the tenor of the agreements, which
reflects the magnitude of the interest rate risk. The majority of
securities financing agreements collateralized by U.S. government
securities are not accounted for under the fair value option as
these contracts are generally short-dated and therefore the
interest rate risk is not significant.
Long-term Deposits
The Corporation elected to account for certain long-term fixed-rate
and rate-linked deposits that are economically hedged with
derivatives under the fair value option. Election of the fair value
option allows the Corporation to reduce the accounting volatility
that would otherwise result from the asymmetry created by
accounting for the financial instruments at historical cost and the
economic hedges at fair value. The Corporation did not elect to
carry other long-term deposits at fair value because they were not
economically hedged using derivatives.
Other Short-term Borrowings
The Corporation elected to account for certain other short-term
borrowings under the fair value option because this debt is risk-
managed on a fair value basis.
Long-term Debt
The Corporation elected to account for certain long-term debt,
primarily structured liabilities, under the fair value option. This long-
term debt is risk-managed on a fair value basis. Election of the
fair value option allows the Corporation to reduce the accounting
volatility that would otherwise result from the asymmetry created
by accounting for these financial instruments at historical cost and
the economic hedges at fair value.
Asset-backed Secured Financings
The Corporation elected to account for certain asset-backed
secured financings, which are classified in other short-term
borrowings, under the fair value option. Election of the fair value
option allows the Corporation to reduce the accounting volatility
that would otherwise result from the asymmetry created by
accounting for the asset-backed secured financings at historical
cost and the corresponding mortgage LHFS securing these
financings at fair value.