Capital One 2013 Annual Report Download - page 168

CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Securitization of Loans
We have primarily securitized credit card loans, which have provided a source of funding for us and enabled us
to transfer a certain portion of the economic risk of the loans or debt securities to third parties. See “Note 6—
Variable Interest Entities and Securitizations” for additional details. Loan securitization involves the transfer of a
pool of loan receivables from our portfolio to a trust. The trust then sells an undivided interest in the pool of loan
receivables to third-party investors through the issuance of debt securities and transfers the proceeds from the
debt issuance to us as consideration for the loan receivables transferred. The debt securities are collateralized by
the transferred receivables from our portfolio. We remove loans from our consolidated balance sheets when
securitizations qualify as sales to non-consolidated VIEs, recognize assets retained and liabilities assumed at fair
value and record a gain or loss on the transferred loans. Alternatively, when the transfer does not qualify as a sale
but instead is considered a secured borrowing or when the sale is to a consolidated VIE, the asset will remain on
our consolidated financial statements with an offsetting liability recognized for the amount of proceeds received.
Premises and Equipment
Land is carried at cost. Properties and equipment, including leasehold improvements, are stated at cost less
accumulated depreciation and amortization. We capitalize direct costs incurred during the application
development stage of internally developed software projects. Depreciation and amortization expenses are
computed generally by the straight-line method over the estimated useful lives of the assets. Useful lives for
premises and equipment are estimated as follows:
Premises & Equipment Useful Lives
Buildings and improvement 5-39 years
Furniture and equipment 3-10 years
Computers and software 3-7 years
Leasehold improvements Lesser of useful life or
the remaining fixed non-cancelable lease term
Expenditures for maintenance and repairs are charged to earnings as incurred. Gains or losses upon disposition
are reflected in earnings as realized.
Goodwill and Other Intangible Assets
Goodwill is not amortized but is tested for impairment, at the reporting unit level, annually or sooner when
adverse circumstances indicate that it is more than 50% likely that the carrying amount of goodwill exceeds its
implied fair value. A reporting unit is defined as an operating segment or a business one level below an operating
segment and goodwill is assigned to one or more reporting units at the date of acquisition. Our reporting units are
Domestic Card, International Card, Auto, Other Consumer Banking and Commercial Banking. The goodwill
impairment test, performed at October 1 of each year, is a two-step test. The first step identifies whether there is
potential impairment by comparing the fair value of a reporting unit to the carrying amount, including goodwill.
If impairment exists, the second step of the impairment test is required to measure the amount of any impairment
loss. Intangible assets with definite useful lives are amortized either on a straight-line or on an accelerated basis
over their estimated useful lives and are evaluated for impairment whenever events or changes in circumstances
indicate the carrying amount of the assets may not be recoverable. See “Note 7—Goodwill and Other Intangible
Assets” for additional detail.
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