Discover 2009 Annual Report Download - page 154

• Other accounting policies applied to the operating segments are consistent with the accounting policies described in
Note 2: Summary of Significant Accounting Policies.
• Corporate overhead is not allocated between segments; all corporate overhead is included in the Direct Banking
segment.
• Through its operation of the Discover Network, the Direct Banking segment incurs fixed marketing, servicing and
infrastructure costs that are not specifically allocated among the operating segments.
• The assets of the Company are not allocated among the operating segments in the information reviewed by the
Company’s chief operating decision maker.
• Income taxes are not specifically allocated among the operating segments in the information reviewed by the
Company’s chief operating decision maker.
The following table presents segment data on a managed basis and a reconciliation to a GAAP presentation (dollars in
thousands):
Managed Basis
Securitization
Adjustment(2)
GAAP
Basis
For the Years Ended November 30,
Direct
Banking
Payment
Services(1) Total Total
2009
Interest income .............................................................................................. $6,459,974 $ 1,098 $6,461,072 $(3,315,992) $3,145,080
Interest expense ............................................................................................. 1,648,198 222 1,648,420 (397,136) 1,251,284
Net interest income ..................................................................................... 4,811,776 876 4,812,652 (2,918,856) 1,893,796
Provision for loan losses.................................................................................. 4,358,341 — 4,358,341 (1,995,936) 2,362,405
Other income(3).............................................................................................. 3,677,881 239,794 3,917,675 922,920 4,840,595
Other expense............................................................................................... 2,116,962 134,126 2,251,088 — 2,251,088
Income from continuing operations before income tax expense .......................... $2,014,354 $106,544 $2,120,898 $ — $2,120,898
2008
Interest income .............................................................................................. $6,542,664 $ 3,165 $6,545,829 $(3,853,266) $2,692,563
Interest expense ............................................................................................. 2,356,836 83 2,356,919 (1,068,915) 1,288,004
Net interest income ..................................................................................... 4,185,828 3,082 4,188,910 (2,784,351) 1,404,559
Provision for loan losses.................................................................................. 3,068,604 — 3,068,604 (1,472,989) 1,595,615
Other income ................................................................................................ 2,773,896 179,200 2,953,096 1,311,362 4,264,458
Other expense............................................................................................... 2,314,926 100,871 2,415,797 — 2,415,797
Income from continuing operations before income tax expense .......................... $1,576,194 $ 81,411 $1,657,605 $ — $1,657,605
2007
Interest income .............................................................................................. $6,376,298 $ 2,376 $6,378,674 $(3,794,272) $2,584,402
Interest expense ............................................................................................. 2,741,109 19 2,741,128 (1,517,858) 1,223,270
Net interest income ..................................................................................... 3,635,189 2,357 3,637,546 (2,276,414) 1,361,132
Provision for loan losses.................................................................................. 1,853,395 — 1,853,395 (1,119,508) 733,887
Other income ................................................................................................ 2,101,076 118,700 2,219,776 1,156,906 3,376,682
Other expense............................................................................................... 2,394,117 84,097 2,478,214 — 2,478,214
Income from continuing operations before income tax expense .......................... $1,488,753 $ 36,960 $1,525,713 $ — $1,525,713
(1) Diners Club was acquired on June 30, 2008.
(2) The Securitization Adjustment column presents the effect of loan securitizations by recharacterizing as securitization income the portions of the following items that relate to the securitized loans:
interest income, interest expense, provision for loan losses, discount and interchange revenue and loan fee revenues. Securitization income is reported in other income.
(3) The years ended November 30, 2009 and 2008 include $1.9 billion and $0.9 billion, respectively, of income related to the Visa and MasterCard antitrust litigation settlement, which is included in
the Direct Banking segment. See Note 23: Litigation.
-142-