JP Morgan Chase 2008 Annual Report Download - page 233

Glossary of terms
JPMorgan Chase & Co./ 2008 Annual Report 231
EITF Issue 99-20: “Recognition of Interest Income and Impairment
on Purchased and Retained Beneficial Interests in Securitized
Financial Assets.”
FASB: Financial Accounting Standards Board.
FICO: Fair Isaac Corporation.
FIN 39: FASB Interpretation No. 39, “Offsetting of Amounts Related
to Certain Contracts – an interpretation of APB Opinion No. 10 and
FASB Statement No. 105.”
FIN 41: FASB Interpretation No. 41, “Offsetting of Amounts Related
to Certain Repurchase and Reverse Repurchase Agreements – an
interpretation of APB Opinion No. 10 and a Modification of FASB
Interpretation No. 39.”
FIN 45: FASB Interpretation No. 45, “Guarantor’s Accounting and
Disclosure Requirements for Guarantees, including Indirect
Guarantees of Indebtedness of Others – an interpretation of FASB
Statements No. 5, 57 and 107 and a rescission of FASB
Interpretation No. 34.”
FIN 46R: FASB Interpretation No. 46 (revised December 2003),
“Consolidation of Variable Interest Entities – an interpretation of
ARB No. 51.”
FIN 47: FASB Interpretation No. 47, “Accounting for Conditional
Asset Retirement Obligations – an interpretation of FASB Statement
No. 143.”
FIN 48: FASB Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes – an interpretation of FASB Statement No. 109.”
Forward points: Represents the interest rate differential between
two currencies, which is either added to or subtracted from the cur-
rent exchange rate (i.e., “spot rate”) to determine the forward
exchange rate.
FSP: FASB Staff Position.
FSP FAS 123(R)-3: “Transition Election Related to Accounting for
the Tax Effects of Share-Based Payment Awards.”
FSP FAS 132(R)-1: “Employers’ Disclosures about Postretirement
Benefit Plan Assets.”
FSP FAS 133-1 and FIN 45-4: “Disclosures about Credit
Derivatives and Certain Guarantees: An Amendment of FASB
Statement No. 133 and FASB Interpretation No. 45; and Clarification
of the Effective Date of FASB Statement No. 161.”
FSP FAS 140-4 and FIN 46(R)-8: “Disclosures by Public Entities
(Enterprises) about Transfers of Financial Assets and Interests in
Variable Interest Entities.”
FSP EITF 03-6-1: “Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities.”
FSP FAS 140-3: “Accounting for Transfers of Financial Assets and
Repurchase Financing Transactions.”
FSP FIN 39-1: “Amendment of FASB Interpretation No. 39.”
FSP FIN 46(R)-7: “Application of FASB Interpretation No. 46(R) to
Investment Companies.”
Interchange income: A fee that is paid to a credit card issuer in
the clearing and settlement of a sales or cash advance transaction.
Interests in purchased receivables: Represent an ownership inter-
est in cash flows of an underlying pool of receivables transferred by a
third-party seller into a bankruptcy-remote entity, generally a trust.
Investment-grade: An indication of credit quality based upon
JPMorgan Chase’s internal risk assessment system. “Investment-
grade” generally represents a risk profile similar to a rating of a
“BBB-”/”Baa3” or better, as defined by independent rating agencies.
Managed basis: A non-GAAP presentation of financial results that
includes reclassifications related to credit card securitizations and to
present revenue on a fully taxable-equivalent basis. Management
uses this non-GAAP financial measure at the segment level, because
it believes this provides information to enable investors to under-
stand the underlying operational performance and trends of the par-
ticular business segment and facilitates a comparison of the business
segment with the performance of competitors.
Managed credit card receivables: Refers to credit card receiv-
ables on the Firm’s Consolidated Balance Sheets plus credit card
receivables that have been securitized.
Mark-to-market exposure: A measure, at a point in time, of the
value of a derivative or foreign exchange contract in the open mar-
ket. When the mark-to-market value is positive, it indicates the coun-
terparty owes JPMorgan Chase and, therefore, creates a repayment
risk for the Firm. When the mark-to-market value is negative,
JPMorgan Chase owes the counterparty; in this situation, the Firm
does not have repayment risk.
Master netting agreement: An agreement between two counter-
parties that have multiple derivative contracts with each other that
provides for the net settlement of all contracts through a single pay-
ment, in a single currency, in the event of default on or termination
of any one contract. See FIN 39.
Mortgage product types:
Alt-A
Alt-A loans are generally higher in credit quality than subprime loans
but have characteristics that would disqualify the borrower from a
traditional prime loan. Alt-A lending characteristics may include one
or more of the following: (i) limited documentation; (ii) high com-
bined-loan-to-value (“CLTV”) ratio; (iii) loans secured by non-owner
occupied properties; or (iv) debt-to-income ratio above normal limits.
Perhaps the most important characteristic is limited documentation.
A substantial proportion of traditional Alt-A loans are those where a
borrower does not provide complete documentation of his or her
assets or the amount or source of his or her income.
Option ARMs
The option ARM home loan product is an adjustable-rate mortgage
loan that provides the borrower with the option each month to make