Wells Fargo 2012 Annual Report Download - page 131

See the Glossary of Acronyms at the end of this Report for terms used throughout the Financial Statements and related Notes of this
Form 10-K.
Note 1: Summary of Significant Accounting Policies
Wells Fargo & Company is a diversified financial services
company. We provide banking, insurance, trust and
investments, mortgage banking, investment banking, retail
banking, brokerage, and consumer and commercial finance
through banking stores, the internet and other distribution
channels to consumers, businesses and institutions in all 50
states, the District of Columbia, and in foreign countries. When
we refer to “Wells Fargo,” “the Company,” “we,” “our” or “us,” we
mean Wells Fargo & Company and Subsidiaries (consolidated).
Wells Fargo & Company (the Parent) is a financial holding
company and a bank holding company. We also hold a majority
interest in a real estate investment trust, which has publicly
traded preferred stock outstanding.
Our accounting and reporting policies conform with U.S.
generally accepted accounting principles (GAAP) and practices
in the financial services industry. To prepare the financial
statements in conformity with GAAP, management must make
estimates based on assumptions about future economic and
market conditions (for example, unemployment, market
liquidity, real estate prices, etc.) that affect the reported amounts
of assets and liabilities at the date of the financial statements and
income and expenses during the reporting period and the related
disclosures. Although our estimates contemplate current
conditions and how we expect them to change in the future, it is
reasonably possible that actual conditions could be worse than
anticipated in those estimates, which could materially affect our
results of operations and financial condition. Management has
made significant estimates in several areas, including allowance
for credit losses and purchased credit-impaired (PCI) loans
(Note 6), valuations of residential mortgage servicing rights
(MSRs) (Notes 8 and 9) and financial instruments (Note 17),
liability for mortgage loan repurchase losses (Note 9) and
income taxes (Note 21). Actual results could differ from those
estimates.
Accounting Standards Adopted in 2012
In first quarter 2012, we adopted the following new accounting
guidance:
x ASU 2011-05, Presentation of Comprehensive Income;
x ASU 2011-12, Deferral of the Effective Date for
Amendments to the Presentation of Reclassifications of
Items Out of Accumulated Other Comprehensive Income in
Accounting Standards Update No. 2011-05;
x ASU 2011-04, Amendments to Achieve Common Fair Value
Measurement and Disclosure Requirements in U.S. GAAP
and IFRSs; and
x ASU 2011-03, Reconsideration of Effective Control for
Repurchase Agreements.
ASU 2011-05 eliminates the option for companies to include
the components of other comprehensive income in the statement
of changes in stockholders’ equity. This Update requires entities
to present the components of comprehensive income in either a
single statement or in two separate statements, with the
statement of other comprehensive income (OCI) immediately
following the statement of income. This Update also requires
companies to present amounts reclassified out of OCI and into
net income on the face of the statement of income. In
December 2011, the FASB issued ASU 2011-12, which deferred
the requirement to present reclassification adjustments on the
statement of income. In January 2013, the FASB issued ASU
2013-02, Reporting of Amounts Reclassified Out of
Accumulated Other Comprehensive Income. This guidance
requires supplemental disclosures for significant amounts
reclassified out of accumulated other comprehensive income and
is effective for us in first quarter 2013 with prospective
application. We adopted the remaining provisions of ASU 2011-
05 in first quarter 2012 with retrospective application. This
Update did not affect our consolidated financial results as it
amends only the presentation of comprehensive income.
ASU 2011-04 modifies accounting guidance and expands
existing disclosure requirements for fair value measurements.
This Update clarifies how fair values should be measured for
instruments classified in stockholders’ equity and under what
circumstances premiums and discounts should be applied in fair
value measurements. This Update also permits entities to
measure fair value on a net basis for financial instruments that
are managed based on net exposure to market risks and/or
counterparty credit risk. ASU 2011-04 requires new disclosures
for financial instruments classified as Level 3, including: 1)
quantitative information about unobservable inputs used in
measuring fair value, 2) qualitative discussion of the sensitivity
of fair value measurements to changes in unobservable inputs,
and 3) a description of valuation processes used. This Update
also requires disclosure of fair value levels for financial
instruments that are not recorded at fair value but for which fair
value is required to be disclosed. We adopted this guidance in
first quarter 2012 with prospective application, resulting in
expanded fair value disclosures. The measurement clarifications
of this Update did not have a material effect on our consolidated
financial statements.
ASU 2011-03 amends the criteria companies use to determine
if repurchase and similar agreements should be accounted for as
sales or financings. Specifically, this Update removes the
criterion for transferors to have the ability to meet contractual
obligations through collateral maintenance provisions, even if
transferees fail to return transferred assets pursuant to the
agreements. We adopted this guidance in first quarter 2012 with
prospective application to new transactions and existing
transactions modified on or after January 1, 2012. This Update
did not have a material effect on our consolidated financial
statements.
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