Capital One 2012 Annual Report Download - page 159

CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Cash and Cash Equivalents
Cash and cash equivalents include cash and due from banks, federal funds sold and securities purchased under
agreements to resell and interest-bearing deposits with banks, all of which, if applicable, have stated maturities of
three months or less when acquired. Cash payments for interest expense totaled $2.4 billion, $2.3 billion and
$2.9 billion in 2012, 2011 and 2010, respectively. Cash payments for income taxes totaled $1.6 billion,
$982 million and $350 million in 2012, 2011 and 2010, respectively.
Securities Resale and Repurchase Agreements
Securities purchased under resale agreements and securities loaned or sold under agreements to repurchase,
principally U.S. government and agency obligations, are not accounted for as sales but as collateralized financing
transactions and recorded at the amounts at which the securities were acquired or sold, plus accrued interest. We
receive securities purchased under agreements to resell and make delivery of securities sold under agreements to
repurchase. We continually monitor the market value of these securities and deliver or obtain additional
collateral, as appropriate.
Investment Securities
Our investment securities consist primarily of fixed-income debt securities and equity securities. The accounting
and measurement framework for our investment securities differs depending on the security classification. We
classify securities as available for sale or held to maturity based on our investment strategy and management’s
assessment of our intent and ability to hold the securities until maturity. Securities that we intend to hold for an
indefinite period of time and may sell prior to maturity in response to changes in our investment strategy,
liquidity needs, interest rate risk profile or for other reasons are classified as available for sale. Securities that we
have the intent and ability to hold until maturity are classified as held to maturity.
Available-for-sale securities are carried at fair value with unrealized net gains or losses, net of taxes, recorded in
accumulated other comprehensive income in stockholders’ equity. Held-to maturity securities are carried at
amortized cost. For most of our investment securities, interest income is recognized using the effective interest
method. Deferred items, including unamortized premiums, discounts and other basis adjustments, are recognized
in interest income over the contractual lives of the securities using the effective interest method. We record
purchases and sales of investment securities on a trade date basis. Realized gains and losses from the sale of debt
securities are computed using the first in first out method of identification, and included in non-interest income in
our consolidated statements of income.
We regularly evaluate our securities whose value has declined below amortized cost to assess whether the decline
in fair value is other than temporary. Amortized cost reflects historical cost adjusted for amortization of
premiums, accretion of discounts and other-than-temporary impairment write-down. We discuss our assessment
of and accounting for other-than-temporary impairment in “Note 4—Investment Securities.” We discuss the
techniques we use in determining the fair value of our investment securities in “Note 19—Fair Value of Financial
Instruments.”
Loans
Our total loan portfolio consists of loans we own and loans underlying our securitization trusts. Our loan
portfolio consists of credit card, consumer banking and commercial banking loans. Credit card loans consist of
domestic and international credit card loans as well as installment loans. Consumer banking loans consist of auto,
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