Capital One 2012 Annual Report Download - page 261

CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
We are required to measure and recognize certain other financial assets at fair value on a nonrecurring basis in
the consolidated balance sheets. These financial assets are not measured at fair value on an ongoing basis but are
subject to fair value adjustments in certain circumstances (for example, when we evaluate impairment).
Loans Held For Sale
Loans held for sale are carried at the lower of aggregate cost, net of deferred fees and deferred origination costs,
or fair value. The fair value of loans held for sale is determined using a discounted cash flow model or the fair
value of the underlying collateral, less the estimated cost to sell. Held-for-sale loans that are valued using a
discounted cash flow model are classified as level 2. Loans that are valued using fair value less the estimated cost
to sell have significant unobservable inputs and are classified as Level 3 under the fair value hierarchy. Fair value
adjustments to loans held for sale are recorded in other non-interest expense in our consolidated statements of
income.
Loans Held For Investment, Net
Loans held for investment that are individually assessed for impairment are carried at the fair value of the
underlying collateral, less the estimated cost to sell. Due to the use of unobservable inputs, loans held for
investment are classified as Level 3 under the fair value hierarchy. Fair value adjustments for loans held for
investment are recorded in provision for credit losses in the consolidated statement of income.
Foreclosed Property and Other Repossessed Assets
Foreclosed property and other repossessed assets are carried at the lower of the carrying amount or fair value less
costs to sell. Due to the use of significant unobservable inputs, foreclosed property is classified as Level 3 under
the fair value hierarchy. Fair value adjustments for foreclosed property are recorded in other non-interest expense
in the consolidated statement of income.
Other Assets
Nonrecurring other assets measured at fair value consist of long-lived assets held for sale. These assets are
recorded in other assets in our consolidated balance sheets. These assets are carried at the lower of their carrying
amount or fair value less costs to sell. Due to the use of unobservable inputs, long-lived assets held for sale are
classified as Level 3 under the fair value hierarchy. Fair value adjustments for other assets are recorded in other
non-interest expense in the consolidated statement of income.
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