JP Morgan Chase 2010 Annual Report Download - page 244

Notes to consolidated financial statements
244 JPMorgan Chase & Co./2010 Annual Report
Note 16 – Variable interest entities
For a further description of JPMorgan Chase’s accounting policies regarding consolidation of VIEs, see Note 1 on pages 164–165 of this Annual
Report.
The following table summarizes the most significant types of Firm-sponsored VIEs by business segment. The Firm considers a “sponsored”
VIE to include any entity where: (1) JPMorgan Chase is the principal beneficiary of the structure; (2) the VIE is used by JPMorgan Chase to
securitize Firm assets; (3) the VIE issues financial instruments with the JPMorgan Chase name; or (4) the entity is a JPMorgan Chase–
administered asset-backed commercial paper (“ABCP”) conduit.
Line-of-Business Transaction Type Activity
Annual Report
page reference
Card Services
Credit card securiti
zation trusts
Securitization of both originated and purchased credit card
receivables
245
–
24
6
RFS
Mortgage and other securit
i
zation trusts
Securitization of originated and purchased residential mor
t-
gages, automobile and student loans
246
–
24
9
IB Mortgage and other securitization trusts Securitization of both originated and purchased residential
and commercial mortgages, automobile and student loans
246–249
Multi-seller conduits
Investor intermediation activities:
Assist clients in accessing the financial markets in a cost-
efficient manner and structures transactions to meet investor
needs
249–250
Municipal bond vehicles
250
–
251
Credi
t
-
relat
ed note vehicles
252
Asset swap vehicles
252
–
253
The Firm’s other business segments are also involved with VIEs, but to a lesser extent, as follows:
• Asset Management (“AM”): Sponsors and manages a limited number of funds that are deemed VIEs. As asset manager of the funds, AM
earns a fee based on assets managed; the fee varies with each fund’s investment objective and is competitively priced. For the limited
number of fund entities that qualify as VIEs, AM’s interests are, in certain cases, considered to be significant variable interests that result
in consolidation of the financial results of these entities.
• Treasury & Securities Services (“TSS”): Provides services to a number of VIEs that are similar to those provided to non-VIEs. TSS earns
market-based fees for the services it provides. TSS’s interests are generally not considered to be significant variable interests and/or do
not control these VIEs; therefore, TSS does not consolidate these VIEs.
• Commercial Banking (“CB”): CB makes investments in and provides lending to community development entities that may meet the
definition of a VIE. In addition, CB provides financing and lending related services to certain client sponsored VIEs. In general, CB does
not control the activities of these entities and does not consolidate these entities.
• Corporate/Private Equity: Corporate uses VIEs to issue guaranteed capital debt securities. See Note 22 on pages 265–266 of this Annual
Report for further information. The Private Equity business, within Corporate/Private Equity, may be involved with entities that are
deemed VIEs. However, the Firm’s private equity business is subject to specialized investment company accounting, which does not re-
quire the consolidation of investments, including VIEs.
The Firm also invests in and provides financing and other services to VIEs sponsored by third parties, as described on page 253 of this Note.
New consolidation accounting guidance for VIEs
On January 1, 2010, the Firm implemented consolidation accounting guidance related to VIEs. The following table summarizes the incre-
mental impact at adoption.
(in millions
, except rat
ios
)
U.S.
GAAP assets
U.S.
GAAP liabil
i
ties
Stockholders’
equity
Tier 1 capital
As of Dece
m
ber 31, 2009
$
2,031,989
$
1,866,624
$
165,365
11.10
%
Impact of new accounting guidance for consolid
a
tion
of VIEs
Credit card
(a)
60,901 65,353 (4,452) (0.30
)%
Multi-seller conduits
(b)
17,724 17,744 (20) —
Mortgage & other
(c)(d)
9,059 9,107 (48) (0.04
)%
Total impact of new guidance
87,684 92,204 (4,520) (0.34
)%(e)
Beginning balance as of January 1, 2010
$2,119,673 $1,958,828 $ 160,845 10.76
%