JP Morgan Chase 2008 Annual Report Download - page 137

JPMorgan Chase & Co./ 2008 Annual Report 135
of contingent assets and liabilities. Actual results could be different
from these estimates. For discussion of Critical Accounting Estimates
used by the Firm, see pages 119–123 of this Annual Report.
Foreign currency translation
JPMorgan Chase revalues assets, liabilities, revenue and expense
denominated in non-U.S. currencies into U.S. dollars using applicable
exchange rates.
Gains and losses relating to translating functional currency financial
statements for U.S. reporting are included in other comprehensive
income (loss) within stockholders’ equity. Gains and losses relating
to nonfunctional currency transactions, including non-U.S. operations
where the functional currency is the U.S. dollar, are reported in the
Consolidated Statements of Income.
Foreclosed property
The Firm acquires property from borrowers through loan restructur-
ings, workouts, and foreclosures. Property acquired may include real
property (e.g., land, buildings, and fixtures) and personal property
(e.g., aircraft, railcars, and ships). Acquired property is valued at fair
value less costs to sell at acquisition. Each quarter the fair value of
the acquired property is reviewed and adjusted, if necessary. Any
adjustments to fair value in the first 90 days are credited/charged to
the allowance for loan losses and thereafter to other expense.
Statements of cash flows
For JPMorgan Chase’s Consolidated Statements of Cash Flows, cash
is defined as those amounts included in cash and due from banks.
Significant accounting policies
The following table identifies JPMorgan Chase’s other significant
accounting policies and the Note and page where a detailed descrip-
tion of each policy can be found.
Note 2 – Business changes and
developments
Decrease in Common Stock Dividend
On February 23, 2009, the Board of Directors reduced the Firm's quar-
terly common stock dividend from $0.38 to $0.05 per share, effective
for the dividend payable April 30, 2009, to shareholders of record on
April 6, 2009.
Acquisition of the banking operations of Washington
Mutual Bank
On September 25, 2008, JPMorgan Chase acquired the banking
operations of Washington Mutual Bank (“Washington Mutual”) from
the Federal Deposit Insurance Corporation (“FDIC”) for $1.9 billion.
The acquisition expands JPMorgan Chase’s consumer branch network
into several states, including California, Florida and Washington,
among others. The acquisition also extends the reach of the Firm’s
business banking, commercial banking, credit card, consumer lending
and wealth management businesses. The acquisition was accounted
for under the purchase method of accounting in accordance with
SFAS 141.
The $1.9 billion purchase price was allocated to the Washington
Mutual assets acquired and liabilities assumed using preliminary
allocated values as of September 25, 2008, which resulted in nega-
tive goodwill. The initial allocation of the purchase price was pre-
sented on a preliminary basis at September 30, 2008, due to the
short time period between the closing of the transaction (which
occurred simultaneously with its announcement on September 25,
2008) and the end of the third quarter. In accordance with SFAS
141, noncurrent nonfinancial assets that are not held-for-sale, such
as the premises and equipment and other intangibles, acquired in
the Washington Mutual transaction were written down against the
negative goodwill. The negative goodwill that remained after writing
down the nonfinancial assets was recognized as an extraordinary
gain. As a result of the refinement of the purchase price allocation
during the fourth quarter of 2008, the initial extraordinary gain of
$581 million was increased $1.3 billion to $1.9 billion.
Fair value measurement Note 4 Page 141
Fair value option Note 5 Page 156
Principal transactions activities Note 6 Page 158
Other noninterest revenue Note 7 Page 160
Pension and other postretirement employee
benefit plans Note 9 Page 161
Employee stock-based incentives Note 10 Page 167
Noninterest expense Note 11 Page 170
Securities Note 12 Page 170
Securities financing activities Note 13 Page 174
Loans Note 14 Page 175
Allowance for credit losses Note 15 Page 178
Loan securitizations Note 16 Page 180
Variable interest entities Note 17 Page 189
Goodwill and other intangible assets Note 18 Page 198
Premises and equipment Note 19 Page 201
Other borrowed funds Note 21 Page 202
Accounts payable and other liabilities Note 22 Page 202
Income taxes Note 28 Page 209
Commitments and contingencies Note 31 Page 213
Accounting for derivative instruments
and hedging activities Note 32 Page 214
Off-balance sheet lending-related financial
instruments and guarantees Note 33 Page 218