Comerica 2009 Annual Report Download - page 76

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
which defines noncontrolling interests as the portion of equity in a subsidiary not attributable, directly or
indirectly, to the parent. The adoption of the new guidance was not material to the Corporation’s financial
condition and results of operations. Due to the insignificance of the amounts, noncontrolling (minority) interest
in less than 100 percent owned consolidated subsidiaries is included in ‘‘capital surplus’’ on the consolidated
balance sheets and the related net income (loss) attributable to noncontrolling (minority) interest in earnings is
included in ‘‘other noninterest expenses’’ on the consolidated statements of income.
Equity investments in entities that are not VIEs where the Corporation owns less than a majority
(controlling) interest and equity investments in entities that are VIEs where the Corporation is not the primary
beneficiary are not consolidated. Rather, such investments are accounted for using either the equity method or
cost method. The equity method is used for investments in corporate joint ventures and investments where the
Corporation has the ability to exercise significant influence over the investee’s operation and financial policies,
which is generally presumed to exist if the Corporation owns more than 20 percent of the voting interest of the
investee. Equity method investments are included in ‘‘accrued income and other assets’’ on the consolidated
balance sheets, with income and losses recorded in ‘‘other noninterest income’’ on the consolidated statements of
income. Unconsolidated equity investments that do not meet the criteria to be accounted for under the equity
method are accounted for under the cost method. Cost method investments in publicly traded companies are
included in ‘‘investment securities available-for-sale’’ on the consolidated balance sheets, with income (net of
write-downs) recorded in ‘‘net securities gains’’ on the consolidated statements of income. Cost method
investments in non-publicly traded companies are included in ‘‘accrued income and other assets’’ on the
consolidated balance sheets, with income (net of write-downs) recorded in ‘‘other noninterest income’’ on the
consolidated statements of income.
For further information regarding the Corporation’s investments in VIEs, refer to Note 11.
Fair Value Measurements
Fair value measurement applies whenever accounting guidance requires or permits assets or liabilities to be
measured at fair value. Fair value is defined as the exchange price that would be received to sell an asset or paid
to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly
transaction (i.e., not a forced transaction, such as a liquidation or distressed sale) between market participants at
the measurement date. Fair value is based on the assumptions market participants would use when pricing an
asset or liability. Fair value measurements and disclosures guidance establishes a three-level fair value hierarchy
that prioritizes the information used to develop fair value. The fair value hierarchy gives the highest priority to
quoted prices in active markets and the lowest priority to unobservable data. Fair value measurements are
separately disclosed by level within the fair value hierarchy. For assets and liabilities recorded at fair value, it is
the Corporation’s policy to maximize the use of observable inputs and minimize the use of unobservable inputs
when developing fair value measurements for those items for which there is an active market.
In the first quarter 2009, the Corporation adopted new fair value measurement guidance related to
determining fair value when the volume and level of activity for the asset or liability have significantly decreased.
The new guidance requires an assessment of whether certain factors exist to indicate that the market for an
instrument is not active at the measurement date. If, after evaluating those factors, the evidence indicates the
market is not active, the Corporation must determine whether recent quoted transaction prices are associated
with distressed transactions. If the Corporation concludes that the quoted prices are associated with distressed
transactions, an adjustment to the quoted prices may be necessary or the Corporation may conclude that a
change in valuation technique or the use of multiple techniques may be appropriate to estimate an instrument’s
fair value. The adoption of the new fair value measurement guidance impacted the estimated fair value of
auction-rate securities at March 31, 2009, as the Corporation determined the market was not active for the
auction-rate securities portfolio. The rate of redemption of the various types of auction-rate securities held by the
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