JP Morgan Chase 2006 Annual Report Download - page 125

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JPMorgan Chase & Co. / 2006 Annual Report 123
Note 17 – Premises and equipment
Premises and equipment, including leasehold improvements, are carried at cost
less accumulated depreciation and amortization. JPMorgan Chase computes
depreciation using the straight-line method over the estimated useful life of an
asset. For leasehold improvements, the Firm uses the straight-line method
computed over the lesser of the remaining term of the leased facility or 10
years. JPMorgan Chase has recorded immaterial asset retirement obligations
related to asbestos remediation under SFAS 143 and FIN 47 in those cases
where it has sufficient information to estimate the obligations’ fair value.
The components of credit card relationships, core deposits and other intangible assets were as follows:
2006 2005
Net Net
Gross Accumulated carrying Gross Accumulated carrying
December 31, (in millions) amount amortization value amount amortization value
Purchased credit card relationships $ 5,716 $ 2,781 $ 2,935 $ 5,325 $ 2,050 $ 3,275
All other intangibles:
Other credit card–related intangibles 367 65 302 183 59 124
Core deposit intangibles 4,283 1,660 2,623 3,797 1,092 2,705
Other intangibles(a) 1,961 515(b) 1,446 2,582 579(b) 2,003
(a) Amounts at December 31, 2006, exclude, and amounts at December 31,2005, include, other intangibles and related accumulated amortization of selected corporate trust businesses related to the
transaction with The Bank of New York.
(b) Includes $11 million and $14 million of amortization expense related to servicing assets on securitized automobile loans for the years ended December 31, 2006 and 2005, respectively.
Amortization expense
The following table presents amortization expense related to credit card relationships, core deposits and All other intangible assets.
Year ended December 31, (in millions) 2006 2005 2004(b)
Purchased credit card relationships $731 $ 703 $ 476
All other intangibles:
Other credit card–related intangibles 636 23
Core deposit intangibles 568 623 330
Other intangibles(a) 123 128 82
Total amortization expense $ 1,428 $ 1,490 $ 911
(a) Amortization expense related to the aforementioned selected corporate trust businesses were reported in Income from discontinued operations for all periods presented.
(b) 2004 results include six months of the combined Firm’s results and six months of heritage JPMorgan Chase results.
Future amortization expense
The following table presents estimated future amortization expense related to credit card relationships, core deposits and All other intangible assets at December 31,
2006:
Other credit
Purchased credit card-related Core deposit All other
Year ended December 31, (in millions) card relationships intangibles intangibles intangible assets Total
2007 $ 700 $ 10 $ 555 $ 109 $ 1,374
2008 580 17 479 100 1,176
2009 428 23 397 92 940
2010 358 30 336 81 805
2011 289 35 293 73 690
JPMorgan Chase capitalizes certain costs associated with the acquisition or
development of internal-use software under SOP 98-1. Once the software is
ready for its intended use, these costs are amortized on a straight-line basis
over the software’s expected useful life, and reviewed for impairment on an
ongoing basis.
Purchased credit card relationships and All other intangible assets
During 2006, Purchased credit card relationship intangibles decreased by
$340 million as a result of $731 million in amortization expense, partially
offset by increases from various acquisitions of private-label portfolios and
purchase accounting adjustments related to the November 2005 acquisition
of the Sears Canada credit card business. During 2006, all other intangible
assets declined $461 million, primarily as a result of amortization expense
and a reduction of $436 million related to the transfer of selected corporate
trust businesses to The Bank of New York, partially offset by an increase in
core deposit intangibles of $485 million resulting from the acquisition of The
Bank of New York's consumer, business banking and middle-market banking
businesses, and further purchase accounting adjustments related to the
acquisition of the Sears Canada credit card business. Except for $513 million
of indefinite-lived intangibles related to asset management advisory con-
tracts that are not amortized but instead are tested for impairment at least
annually, the remainder of the Firm’s other acquired intangible assets are
subject to amortization.