Huntington National Bank 2011 Annual Report Download - page 144

differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are determined using enacted tax rates expected to apply in the year
in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income at the time of enactment of such change in tax
rates. Any interest or penalties due for payment of income taxes are included in the provision for income taxes.
To the extent that we do not consider it more likely than not that a deferred tax asset will be recovered, a
valuation allowance is recorded. All positive and negative evidence is reviewed when determining how much of
a valuation allowance is recognized on a quarterly basis. In determining the requirements for a valuation
allowance, sources of possible taxable income are evaluated including future reversals of existing taxable
temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards,
taxable income in appropriate carryback years, and tax-planning strategies. Huntington applies a more likely than
not recognition threshold for all tax uncertainties. Huntington reviews the tax positions quarterly.
Stock Repurchases — Acquisitions of Huntington stock are recorded at cost. The re-issuance of shares is
recorded at weighted-average cost.
Share-Based Compensation — Huntington uses the fair value recognition concept relating to its share-based
compensation plans. Compensation expense is recognized based on the fair value of unvested stock options and
awards over the requisite service period.
Segment Results — Accounting policies for the business segments are the same as those used in the
preparation of the Consolidated Financial Statements with respect to activities specifically attributable to each
business segment. However, the preparation of business segment results requires Management to establish
methodologies to allocate funding costs and benefits, expenses, and other financial elements to each business
segment. Changes are made in these methodologies utilized for certain balance sheet and income statement
allocations performed by Huntington’s management reporting system, as appropriate.
Statement of Cash Flows — Cash and cash equivalents are defined as Cash and due from banks which
includes amounts on deposit with the Federal Reserve and federal funds sold and securities purchased under
resale agreements.
Fair Value Measurements — The Company records certain of its assets and liabilities at fair value. Fair
value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit
price) in the principal or most advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. Fair value measurements are classified within one of three levels in
a valuation hierarchy based upon the transparency of inputs to the valuation of an asset or liability as of the
measurement date. The three levels are defined as follows:
Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or
liabilities in active markets.
Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in
active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for
substantially the full term of the financial instrument.
Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value
measurement.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of
input that is significant to the fair value measurement.
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