Wells Fargo 2010 Annual Report Download - page 184

Note 16: Fair Values of Assets and Liabilities (continued)
NONMARKETABLE EQUITY INVESTMENTS Nonmarketable
equity investments are recorded under the cost or equity method
of accounting. There are generally restrictions on the sale and/or
liquidation of these investments, including federal bank stock.
Federal bank stock carrying value approximates fair value. We
use facts and circumstances available to estimate the fair value of
our nonmarketable equity investments. We typically consider
our access to and need for capital (including recent or projected
financing activity), qualitative assessments of the viability of the
investee, evaluation of the financial statements of the investee
and prospects for its future. Public equity investments are valued
using quoted market prices and discounts are only applied when
there are trading restrictions that are an attribute of the
investment. Investments in non-public securities are recorded at
our estimate of fair value using metrics such as security prices of
comparable public companies, acquisition prices for similar
companies and original investment purchase price multiples,
while also incorporating a portfolio company's financial
performance and specific factors. For investments in private
equity funds, we use the NAV provided by the fund sponsor as an
appropriate measure of fair value. In some cases, such NAVs
require adjustments based on certain unobservable inputs.
Liabilities
DEPOSIT LIABILITIES Deposit liabilities are carried at historical
cost. The fair value of deposits with no stated maturity, such as
noninterest-bearing demand deposits, interest-bearing checking,
and market rate and other savings, is equal to the amount
payable on demand at the measurement date. The fair value of
other time deposits is calculated based on the discounted value
of contractual cash flows. The discount rate is estimated using
the rates currently offered for like wholesale deposits with
similar remaining maturities.
SHORT-TERM FINANCIAL LIABILITIES Short-term financial
liabilities are carried at historical cost and include federal funds
purchased and securities sold under repurchase agreements,
commercial paper and other short-term borrowings. The
carrying amount is a reasonable estimate of fair value because of
the relatively short time between the origination of the
instrument and its expected realization.
OTHER LIABILITIES Other liabilities recorded at fair value on a
recurring basis, excluding derivative liabilities (see the
“Derivatives” section for derivative liabilities), includes
primarily short sale liabilities. Short sale liabilities are classified
as either Level 1 or Level 2, generally dependent upon whether
the underlying securities have readily obtained quoted prices in
active exchange markets.
LONG-TERM DEBT Long-term debt is generally carried at
amortized cost. For disclosure, we are required to estimate the
fair value of long-term debt. Generally, the discounted cash flow
method is used to estimate the fair value of our long-term debt.
Contractual cash flows are discounted using rates currently
offered for new notes with similar remaining maturities and, as
such, these discount rates include our current spread levels.
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