JP Morgan Chase 2009 Annual Report Download - page 153

JPMorgan Chase & Co./2009 Annual Report 151
Private equity investments, which are recorded in other assets on the
Consolidated Balance Sheets, include investments in buyouts,
growth equity and venture opportunities. These investments are
accounted for under investment company guidelines. Accordingly,
these investments, irrespective of the percentage of equity owner-
ship interest held, are carried on the Consolidated Balance Sheets at
fair value.
Assets held for clients in an agency or fiduciary capacity by the Firm
are not assets of JPMorgan Chase and are not included in the Con-
solidated Balance Sheets.
Use of estimates in the preparation of consolidated finan-
cial statements
The preparation of Consolidated Financial Statements requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, revenue and expense, and
disclosures of contingent assets and liabilities. Actual results could
be different from these estimates.
Foreign currency translation
JPMorgan Chase revalues assets, liabilities, revenue and expense
denominated in non-U.S. currencies into U.S. dollars using applica-
ble 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. opera-
tions where the functional currency is the U.S. dollar, are reported in
the Consolidated Statements of Income.
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.
Fair value measurement Note 3 Page 156
Fair value option Note 4 Page 173
Derivative instruments Note 5 Page 175
Noninterest revenue Note 6 Page 183
Pension and other postretirement employee
benefit plans Note 8 Page 184
Employee stock-based incentives Note 9 Page 192
Noninterest expense Note 10 Page 194
Securities Note 11 Page 195
Securities financing activities Note 12 Page 200
Loans Note 13 Page 200
Allowance for credit losses Note 14 Page 204
Loan securitizations Note 15 Page 206
Variable interest entities Note 16 Page 214
Goodwill and other intangible assets Note 17 Page 222
Premises and equipment Note 18 Page 226
Other borrowed funds Note 20 Page 227
Accounts payable and other liabilities Note 21 Page 227
Income taxes Note 27 Page 234
Commitments and contingencies Note 30 Page 238
Off–balance sheet lending-related financial
instruments and guarantees Note 31 Page 238
Note 2 – Business changes and
developments
Decrease in Common Stock Dividend
On February 23, 2009, the Board of Directors reduced the Firm’s
quarterly 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 expanded JPMorgan Chase’s consumer
branch network into several states, including California, Florida
Washington, Georgia, Idaho, Nevada and Oregon and created the
third largest branch network in the U.S. 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 ac-
counting, which requires that the assets and liabilities of Washing-
ton Mutual be initially reported at fair value.
In 2008, the $1.9 billion purchase price was preliminarily allocated
to the Washington Mutual assets acquired and liabilities assumed,
which resulted in negative goodwill. In accordance with U.S. GAAP
for business combinations, that was in effect at the time of this
acquisition, noncurrent nonfinancial assets that were 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 of $1.9 billion at December 31, 2008. The final
total extraordinary gain that resulted from the Washington Mutual
transaction was $2.0 billion.