Capital One 2008 Annual Report Download - page 104

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Note 1
Summary of Significant Accounting Policies
Business
Capital One Financial Corporation (the Corporation) is a diversified financial services company whose banking and non-banking
subsidiaries market a variety of financial products and services. The Corporations principal subsidiaries are:
 Capital One Bank (USA), National Association (COBNA) which currently offers credit and debit card products, other
lending products and deposit products.
 Capital One, National Association (CONA) which offers a broad spectrum of banking products and financial services to
consumers, small businesses and commercial clients.
During 2008, the Corporation completed several reorganizations and consolidations to streamline operations and regulatory
relationships. On January 1, Capital One Auto Finance Inc. (COAF) moved from a direct subsidiary of the Corporation to become a
direct operating subsidiary of CONA. In connection with the COAF move, one of COAFs direct operating subsidiaries, Onyx
Acceptance Corporation (Onyx), became a direct subsidiary of the Corporation. On March 1, the Corporation converted Capital One
Bank from a Virginia-state chartered bank to a national association called Capital One Bank (USA), National Association
(COBNA). On March 8, Superior Savings of New England, N.A. (Superior) merged with and into CONA. Both COBNA and
CONA are primarily regulated by the Office of the Comptroller of the Currency (the OCC). In May 2008, we consolidated the
business and operations of two registered broker-dealers, Capital One Securities, LLC (dba Capital One Investments, LLC) and
Capital One Investment Services Corporation (formerly NFB Investment Services Corporation), into Capital One Investments
Services Corporation. In addition, in May 2008, we consolidated the business and operations of three insurance agencies, Capital One
Agency Corp., GreenPoint Agency, Inc. and Hibernia Insurance Agency, LLC into Green Point Agency, Inc., which is now known as
Capital One Agency LLC.
On December 4, 2008, the Company announced its intention to acquire Chevy Chase Bank F.S.B. in a cash and stock transaction
valued at approximately $520 million. On February 13, 2009, the Company received approval from the Federal Reserve to acquire all
of the shares of Chevy Chase F.S.B. and certain of its subsidaires. The transaction is expected to close in the first quarter of 2009.
During 2007, Capital One F.S.B. and North Fork Bank merged with and into CONA.
In the third quarter of 2007, the Company shut down the mortgage origination operations of its wholesale mortgage banking unit,
GreenPoint Mortgage (GreenPoint), an operating subsidiary of CONA. Additional information can be found in Note 2.
The Corporation and its subsidiaries are hereafter collectively referred to as the Company.
Basis of Presentation
The accompanying Consolidated Financial Statements have been prepared in accordance with accounting principles generally
accepted in the United States (GAAP) that require management to make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual results could differ from these estimates.
The Consolidated Financial Statements include the accounts of the Company in which it has a controlling financial interest.
Investments in unconsolidated entities where we have the ability to exercise significant influence over the operations of the investee
are accounted for using the equity method of accounting. This includes interests in variable interest entities (VIEs) where we are not
the primary beneficiary. Investments not meeting the criteria for equity method accounting are accounted for using the cost method of
accounting. Investments in unconsolidated entities are included in other assets, and our share of income or loss is recorded in other
non-interest income. All significant intercompany balances and transactions have been eliminated. Certain prior years amounts have
been reclassified to conform to the 2008 presentation. All amounts in the following notes, excluding per share data, are presented in
thousands.
Special Purpose Entities and Variable Interest Entities
Special purpose entities (SPEs) are broadly defined as legal entities structured for a particular purpose. There are two different
accounting frameworks applicable to SPEs: the qualifying SPE (QSPE) framework under Statement of Financial Accounting
Standard (SFAS) No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (SFAS
140) and the VIE framework under Financial Accounting Standards Board Interpretation No. 46 (Revised 2003), Consolidation of
Variable Interest Entities (FIN 46(R)).