Huntington National Bank 2005 Annual Report Download - page 111

NOTES TOCONSOLIDATED FINANCIAL STATEMENTS HUNTINGTON BANCSHARES INCORPORATED
–F INANCIAL A CCOUNTING S TANDARDS B OARD (FASB) S TATEMENT N O . 154, Accounting Changes and Error Corrections —a
replacement of APB Opinion No. 20 and FASB Statement No. 3 (Statement No. 154) — In May 2005, the FASB issued
Statement 154, which replaces APB Opinion No. 20, Accounting Changes, and Statement No. 3, Reporting Accounting Changes in
Interim Financial Statements. Statement 154 changes the requirements for the accounting for and reporting of a change in
accounting principle. Statement 154 is effective for accounting changes and corrections of errors made in fiscal years beginning
after December 15, 2005. The impact of this new pronouncement is not expected to be material to Huntington’s financial
condition, results of operations, or cash flows.
–S TATEMENT N O . 123 ( REVISED 2004), Share-Based Payment (S TATEMENT N O . 123R) — Statement 123R was issued in
December 2004, requiring that the compensation cost relating to share-based payment transactions be recognized in the
financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. Statement
123R covers a wide range of share-based compensation arrangements including share options, restricted share plans,
performance-based awards, share appreciation rights, and employee share purchase plans. Statement 123R replaces Statement
No. 123, Accounting for Stock-Based Compensation (Statement 123), and supersedes Accounting Principles Board (APB) Opinion
No. 25, Accounting for Stock Issued to Employees (APB 25). Statement 123, as originally issued in 1995, established as preferable
a fair-value-based method of accounting for share-based payment transactions with employees. However, that Statement
permitted entities the option of continuing to apply the guidance in APB 25, as long as the footnotes to financial statements
disclosed pro forma net income under the preferable fair-value-based method. Effective January 1, 2006, Huntington has
adopted Statement 123R. The impact of adoption to Huntington’s results of operations is similar to the pro forma disclosures
presented in Note 1. (See Note 1 for the current accounting policy on share-based payments and Note 17 for the share-based
payment disclosures).
–S TAFF A CCOUNTING B ULLETIN N O . 107, Share Based Payments (SAB 107) — On March 29, 2005, the SEC issued SAB 107 to
provide public companies additional guidance in applying the provisions of Statement No. 123R. Among other things, SAB 107
describes the SEC staff’s expectations in determining the assumptions that underlie the fair value estimates and discusses the
interaction of Statement 123R with certain existing SEC guidance. Huntington has adopted the provisions of SAB 107 in
conjunction with the adoption of Statement 123R beginning January 1, 2006.
–P ROPOSED INTERPRETATION OF S TATEMENT N O . 109, Accounting for Uncertain Tax Positions — In July 2005, the FASB issued
an exposure draft of a proposed interpretation on accounting for uncertain tax positions under Statement No. 109, Accounting
for Income Taxes. The exposure draft contains proposed guidance on the recognition and measurement of uncertain tax
positions. If adopted as proposed, the Company would be required to recognize, in its financial statements, the best estimate of
the impact of a tax position, only if that tax position is probable of being sustained on audit based solely on the technical
merits of the position. The proposed effective date for the interpretation was originally scheduled for December 31, 2005, with
a cumulative effect of a change in accounting principle to be recorded upon the initial adoption. In January 2006, FASB
decided to make forthcoming rules on certain tax positions effective in 2007. FASB also moved to a view that such recognition
should be changed from the tax position being ‘‘probable of being sustained on audit based solely on the technical merits of
the position’’ to a less stringent benchmark of ‘‘more likely than not’’ that the position would be sustained on audit or final
resolution through legal action or settlement. FASB expects to publish the planned rules on uncertain tax positions in March
or April of 2006. Huntington is currently evaluating the impact this proposed interpretation will have on its consolidated
financial statements.
–P ROPOSED FASB AMENDMENT TO S TATEMENT N O . 140, Servicing Rights — In August 2005, the FASB issued an exposure draft,
Accounting for Servicing of Financial Assets, an amendment of FASB Statement No. 140. This exposure draft would amend
Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, and would
require that all separately recognized servicing rights be initially measured at fair value, if practicable. For each class of
separately recognized servicing assets and liabilities, this exposure draft would permit Huntington to choose either to report
servicing assets and liabilities at fair value or at amortized cost. Under the fair value approach, servicing assets and liabilities
will be recorded at fair value at each reporting date with changes in fair value recorded in earnings in the period in which the
changes occur. Under the amortized cost method, servicing assets and liabilities are amortized in proportion to and over the
period of estimated net servicing income or net servicing loss and are assessed for impairment based on fair value at each
reporting date. The statement would be effective for fiscal years beginning after September 15, 2006, and allows early adoption
as of the beginning of a fiscal year for which the entity has not previously issued interim financial statements.
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