JP Morgan Chase 2008 Annual Report Download - page 157

JPMorgan Chase & Co./ 2008 Annual Report 155
The following table presents the carrying value and estimated fair value of financial assets and liabilities as required by SFAS 107 (a discussion of
the valuation of the individual instruments can be found at the beginning of this Note or following the table below).
2008 2007
Carrying Estimated Appreciation/ Carrying Estimated Appreciation/
December 31, (in billions) value fair value (depreciation) value fair value (depreciation)
Financial assets
Assets for which fair value approximates carrying value $ 226.0 $ 226.0 $ — $ 76.4 $ 76.4 $ —
Federal funds sold and securities purchased under resale
agreements (included $20.8 and $19.1 at fair value at
December 31, 2008 and 2007, respectively) 203.1 203.1 — 170.9 170.9 —
Securities borrowed (included $3.4 and zero at fair value
at December 31, 2008 and 2007, respectively) 124.0 124.0 — 84.2 84.2 —
Trading assets 510.0 510.0 — 491.4 491.4 —
Securities 205.9 205.9 — 85.4 85.4 —
Loans (included $7.7 and $8.7 at fair value at
December 31, 2008 and 2007, respectively) 721.7 700.0 (21.7) 510.1 510.7 0.6
Mortgage servicing rights at fair value 9.4 9.4 — 8.6 8.6 —
Other (included $29.2 and $22.2 at fair value at
December 31, 2008 and 2007, respectively) 104.6 104.7 0.1 66.6 67.1 0.5
Total financial assets $ 2,104.7 $2,083.1 $(21.6) $ 1,493.6 $ 1,494.7 $ 1.1
Financial liabilities
Deposits (included $5.6 and $6.4 at fair value at
December 31, 2008 and 2007, respectively)(a) $ 1,009.3 $1,010.2 $ (0.9) $ 740.7 $ 741.3 $ (0.6)
Federal funds purchased and securities loaned or sold under
repurchase agreements (included $3.0 and $5.8 at fair value at
December 31, 2008 and 2007, respectively) 192.5 192.5 — 154.4 154.4 —
Commercial paper 37.8 37.8 — 49.6 49.6 —
Other borrowed funds (included $14.7 and $10.8 at fair value at
December 31, 2008 and 2007, respectively) 132.4 134.1 (1.7) 28.8 28.8 —
Trading liabilities 166.9 166.9 — 157.9 157.9 —
Accounts payable and other liabilities 183.3 183.3 — 89.0 89.0 —
Beneficial interests issued by consolidated VIEs (included $1.7 and
$3.0 at fair value at December 31, 2008 and 2007, respectively) 10.6 10.5 0.1 14.0 13.9 0.1
Long-term debt and junior subordinated deferrable interest debentures
(included $58.2 and $70.5 at fair value at December 31, 2008
and 2007, respectively)(b) 270.7 262.1 8.6 199.0 198.7 0.3
Total financial liabilities $ 2,003.5 $1,997.4 $ 6.1 $ 1,433.4 $ 1,433.6 $ (0.2)
Net (depreciation) appreciation $(15.5) $ 0.9
(a) The fair value of interest-bearing deposits are estimated by discounting cash flows using the appropriate market rates for the applicable maturity.
(b) Fair value for long-term debt, including junior subordinated deferrable interest debentures held by trusts that issued guaranteed capital debt securities, is based upon current market
rates and adjusted for JPMorgan Chase’s credit quality.
The majority of the Firm’s unfunded lending-related commitments are
not carried at fair value on a recurring basis on the Consolidated
Balance Sheets nor are they actively traded. Although there is no liq-
uid secondary market for wholesale commitments, the Firm estimates
the fair value of its wholesale lending-related commitments primarily
using the cost of credit derivatives (which is adjusted to account for
the difference in recovery rates between bonds, upon which the cost
of credit derivatives is based, and loans) and loan equivalents (which
represent the portion of an unused commitment expected, based
upon the Firm’s average portfolio historical experience, to become
outstanding in the event an obligor defaults). On this basis, the esti-
mated fair value of the Firm’s lending-related commitments at
December 31, 2008 and 2007, was a liability of $7.5 billion and
$1.9 billion, respectively. The Firm does not estimate the fair value of
consumer lending-related commitments. In many cases, the Firm can
reduce or cancel these commitments by providing the borrower prior
notice, or, in some cases, without notice as permitted by law.