Bank of America 2013 Annual Report Download - page 166

164 Bank of America 2013
Investment banking income consists primarily of advisory and
underwriting fees that are recognized in income as the services
are provided and no contingencies exist. Revenues are generally
recognized net of any direct expenses. Non-reimbursed expenses
are recorded as noninterest expense.
Earnings Per Common Share
Earnings per common share (EPS) is computed by dividing net
income (loss) allocated to common shareholders by the weighted-
average common shares outstanding, except that it does not
include unvested common shares subject to repurchase or
cancellation. Net income (loss) allocated to common shareholders
represents net income (loss) applicable to common shareholders
which is net income (loss) adjusted for preferred stock dividends
including dividends declared, accretion of discounts on preferred
stock including accelerated accretion when preferred stock is
repaid early, and cumulative dividends related to the current
dividend period that have not been declared as of period end, less
income allocated to participating securities (see below for more
information). Diluted EPS is computed by dividing income (loss)
allocated to common shareholders plus dividends on dilutive
convertible preferred stock and preferred stock that can be
tendered to exercise warrants, by the weighted-average common
shares outstanding plus amounts representing the dilutive effect
of stock options outstanding, restricted stock, restricted stock
units, outstanding warrants and the dilution resulting from the
conversion of convertible preferred stock, if applicable.
Unvested share-based payment awards that contain
nonforfeitable rights to dividends are participating securities that
are included in computing EPS using the two-class method. The
two-class method is an earnings allocation formula under which
EPS is calculated for common stock and participating securities
according to dividends declared and participating rights in
undistributed earnings. Under this method, all earnings,
distributed and undistributed, are allocated to participating
securities and common shares based on their respective rights to
receive dividends.
In an exchange of non-convertible preferred stock, income
allocated to common shareholders is adjusted for the difference
between the carrying value of the preferred stock and the fair value
of the consideration exchanged. In an induced conversion of
convertible preferred stock, income allocated to common
shareholders is reduced by the excess of the fair value of the
consideration exchanged over the fair value of the common stock
that would have been issued under the original conversion terms.
Foreign Currency Translation
Assets, liabilities and operations of foreign branches and
subsidiaries are recorded based on the functional currency of each
entity. For certain of the foreign operations, the functional currency
is the local currency, in which case the assets, liabilities and
operations are translated, for consolidation purposes, from the
local currency to the U.S. dollar reporting currency at period-end
rates for assets and liabilities and generally at average rates for
results of operations. The resulting unrealized gains or losses as
well as gains and losses from certain hedges, are reported as a
component of accumulated OCI, net-of-tax. When the foreign
entity’s functional currency is determined to be the U.S. dollar, the
resulting remeasurement gains or losses on foreign currency-
denominated assets or liabilities are included in earnings.
Credit Card and Deposit Arrangements
Endorsing Organization Agreements
The Corporation contracts with other organizations to obtain their
endorsement of the Corporation’s loan and deposit products. This
endorsement may provide to the Corporation exclusive rights to
market to the organization’s members or to customers on behalf
of the Corporation. These organizations endorse the Corporation’s
loan and deposit products and provide the Corporation with their
mailing lists and marketing activities. These agreements generally
have terms that range from two to five years. The Corporation
typically pays royalties in exchange for the endorsement.
Compensation costs related to the credit card agreements are
recorded as contra-revenue in card income.
Cardholder Reward Agreements
The Corporation offers reward programs that allow its cardholders
to earn points that can be redeemed for a broad range of rewards
including cash, travel, gift cards and discounted products. The
Corporation establishes a rewards liability based upon the points
earned that are expected to be redeemed and the average cost
per point redeemed. The points to be redeemed are estimated
based on past redemption behavior, card product type, account
transaction activity and other historical card performance. The
liability is reduced as the points are redeemed. The estimated
cost of the rewards programs is recorded as contra-revenue in card
income.
Accounting Policies
All significant accounting policies are discussed either in this Note
or included in the Notes herein listed below.
Page
Note 2 – Derivatives
Note 3 – Securities
Note 4 – Outstanding Loans and Leases
Note 6 – Securitizations and Other Variable Interest
Entities
Note 7 – Representations and Warranties Obligations
and Corporate Guarantees
Note 12 – Commitments and Contingencies
Note 15 – Earnings Per Common Share
Note 17 – Employee Benefit Plans
Note 18 – Stock-based Compensation Plans
Note 19 – Income Taxes
Note 20 – Fair Value Measurements
Note 23 – Mortgage Servicing Rights
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