Bank of America 2012 Annual Report Download - page 269

Bank of America 2012 267
Securities Financing Agreements
The Corporation elects 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 elects to account for certain long-term fixed-rate
and rate-linked deposits that are hedged with derivatives and do
not qualify for hedge accounting 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 derivatives at fair value. The Corporation
did not elect to carry other long-term deposits at fair value because
they were not hedged using derivatives.
Other Short-term Borrowings
The Corporation elects 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 elects to account for certain long-term debt,
primarily structured liabilities, under the fair value option. This long-
term debt is either risk-managed on a fair value basis or the related
hedges do not qualify for hedge accounting.
Asset-backed Secured Financings
The Corporation elects 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.
The table below provides information about the fair value
carrying amount and the contractual principal outstanding of
assets and liabilities accounted for under the fair value option at
December 31, 2012 and 2011.
Fair Value Option Elections
December 31
2012 2011
(Dollars in millions)
Fair Value
Carrying
Amount
Contractual
Principal
Outstanding
Fair Value
Carrying
Amount Less
Unpaid
Principal
Fair Value
Carrying
Amount
Contractual
Principal
Outstanding
Fair Value
Carrying
Amount Less
Unpaid
Principal
Loans reported as trading account assets $ 1,663 $ 2,879 $ (1,216)$ 1,151 $ 2,371 $ (1,220)
Trading inventory - other 2,170 n/a n/a 1,173 n/a n/a
Consumer and commercial loans 9,002 9,576 (574) 8,804 10,823 (2,019)
Loans held-for-sale 11,659 12,676 (1,017)7,630 9,673 (2,043)
Securities financing agreements 141,309 140,791 518 121,688 121,092 596
Other assets 453 270 183 251 n/a n/a
Long-term deposits 2,262 2,046 216 3,297 3,035 262
Asset-backed secured financings 741 1,176 (435) 650 1,271 (621)
Unfunded loan commitments 528 n/a n/a 1,249 n/a n/a
Other short-term borrowings 3,333 3,333 — 5,908 5,909 (1)
Long-term debt (1) 49,161 50,792 (1,631)46,239 55,854 (9,615)
(1) The majority of the difference between the fair value carrying amount and contractual principal outstanding at December 31, 2012 and 2011 relates to the impact of the Corporation’s credit spreads
as well as the fair value of the embedded derivative, where applicable.
n/a = not applicable