Charles Schwab 2011 Annual Report Download - page 84

THE CHARLES SCHWAB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Millions, Except Per Share Data, Option Price Amounts, Ratios, or as Noted)
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performed after January 1, 2011. Specifically, if the carrying value of a reporting unit, as computed in step one of the
goodwill impairment test, is zero or negative, step two must be performed when it is “more likely than not” that goodwill is
impaired; under these circumstances, entities can no longer assume that no impairment exists because fair value, as computed
in step two, would generally be greater than zero. The adoption of this new guidance did not have a material impact on the
Company’s financial position, results of operations, earnings per share (EPS), or cash flows.
A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring: In April 2011, the FASB issued
new guidance clarifying when a debt restructuring by a creditor constitutes a troubled debt restructuring, which is effective
July 1, 2011 for all restructurings that occur on or after January 1, 2011. This guidance clarifies that a troubled debt
restructuring only exists when a creditor makes a concession in interest rates or payment terms to a debtor experiencing
financial difficulties. It provides additional guidance on determining what constitutes a concession, and on the use of
probability in determining if a debtor could be experiencing financial difficulty prior to defaulting on payments. The adoption
of this new guidance did not have a material impact on the Company’s financial position, results of operations, EPS, or cash
flows.
New Accounting Standard Not Yet Adopted
Testing Goodwill for Impairment: In September 2011, the FASB issued new guidance allowing companies to consider
qualitative factors before performing a quantitative assessment when determining whether goodwill is impaired, which is
effective for goodwill impairment tests performed after January 1, 2012. Specifically, there is no longer a requirement to
perform the two-step goodwill impairment test unless the entity determines that based on qualitative factors, it is more likely
than not that the fair value of a reporting unit is less than its carrying amount. The adoption of this new guidance is not
expected to have a material impact on the Company’s financial position, results of operations, EPS, or cash flows.
3. Business Acquisitions
optionsXpress Holdings, Inc.
On September 1, 2011, the Company completed its acquisition of all of the outstanding common shares of optionsXpress
Holdings, Inc. (optionsXpress) for total consideration of $714 million. optionsXpress is an online brokerage firm primarily
focused on equity option securities and futures. The optionsXpress brokerage platform provides active investors and traders
trading tools, analytics and education to execute a variety of investment strategies. The combination of optionsXpress and
Schwab offers active investors an additional level of service and platform capabilities.
Under the terms of the merger agreement, optionsXpress stockholders received 1.02 shares of the Company’s common stock
for each share of optionsXpress stock. As a result, the Company issued 59 million shares of the Company’s common stock
valued at $710 million, based on the closing price of the Company’s common stock on September 1, 2011. The Company also
assumed optionsXpress’ stock-based compensation awards valued at $4 million.
The results of optionsXpress’ operations have been included in the Company’s consolidated statement of income for the year
ended December 31, 2011, from the date of acquisition. optionsXpress’ net revenues were $68 million and their net loss was
not material for the period September 1, 2011 through December 31, 2011.