Capital One 2012 Annual Report Download - page 176

CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
the remaining contractual life of the indemnification agreement. The guidance is effective for interim and annual
periods beginning on or after December 15, 2012. The guidance will be applied prospectively to existing
indemnification assets as well as to those that arise from future business combinations. We elected to early adopt
the guidance and began amortizing the decrease in cash flows associated with existing indemnification assets as
of December 31, 2012.
Goodwill Impairment
In September 2011, the FASB issued guidance that is intended to simplify goodwill impairment testing by
providing entities with the option to first assess qualitatively whether it is necessary to perform the two-step
quantitative analysis currently required. If an entity chooses to perform a qualitative assessment and determines
that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the
quantitative two-step goodwill impairment test is required. Otherwise, goodwill is deemed to be not impaired and
no further analysis would be necessary. The amended goodwill impairment guidance does not affect the manner
in which a company estimates fair value. The amended guidance was effective for annual and interim goodwill
impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted.
We adopted the amended guidance on January 1, 2012. We had $13.9 billion in goodwill as of December 31,
2012, the value of which was not affected by the adoption of this standard.
Presentation of Comprehensive Income
In June 2011, the FASB issued new accounting guidance that revises the manner in which comprehensive income
is required to be presented in financial statements. The new guidance requires companies to present the
components of net income and other comprehensive income either as one continuous statement or as two
consecutive statements. The guidance eliminates the option to present components of other comprehensive
income in the statement of changes in stockholders’ equity. It does not change the items that must be reported in
other comprehensive income, how such items are measured or when they must be reclassified from other
comprehensive income to net income. The guidance requires retrospective application and was effective for
interim and annual periods beginning on or after December 15, 2011. We adopted the guidance in the first
quarter of 2012 and elected to present other comprehensive income in a separate statement immediately
following our consolidated statements of income. Our adoption of the guidance had no effect on our financial
condition, results of operations or liquidity since it impacts presentation only.
Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure
Requirements in U.S. GAAP and International Financial Reporting Standards (“IFRS”)
In May 2011, the FASB issued amended guidance on fair value that is intended to provide a converged fair value
framework for U.S. GAAP and IFRS. While the amended guidance continues to define fair value as an exit price,
it changes some fair value measurement principles and expands the existing disclosure requirements for fair
value measurements. The amended guidance was effective for public entities during interim and annual periods
beginning after December 15, 2011, with early adoption prohibited. The new guidance requires prospective
application and disclosure in the period of adoption of the change, if any, in valuation techniques and related
inputs resulting from application of the amendments and quantification of the total effect, if practicable. We
adopted the amended guidance in the first quarter of 2012. The change in fair value measurement principles did
not result in any changes to the fair value of our assets or liabilities carried at fair value and thus, had no effect on
our financial condition, results of operations or liquidity. The new disclosures required by the amended guidance
are included in “Note 19—Fair Value of Financial Instruments.”
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