JP Morgan Chase 2014 Annual Report Download - page 169

JPMorgan Chase & Co./2014 Annual Report 167
Investments in qualified affordable housing projects
In January 2014, the FASB issued guidance regarding the
accounting for investments in affordable housing projects
that qualify for the low-income housing tax credit. The
guidance replaces the effective yield method and allows
companies to make an accounting policy election to
amortize the initial cost of its investments in proportion to
the tax credits and other benefits received if certain criteria
are met, and to present the amortization as a component of
income tax expense. The guidance will become effective in
the first quarter of 2015 and is required to be applied
retrospectively, such that the Firm’s results of operations
for prior periods will be revised to reflect the guidance.
The Firm intends to adopt the guidance for all qualifying
investments. The adoption of this guidance is estimated to
reduce retained earnings by approximately $230 million.
The Firm expects that reported other income and income
tax expense will each increase as a result of presenting the
amortization of the initial cost of its investments as
component of income tax expense. The amount of this
increase in each period depends on the size and
characteristics of the Firm’s portfolio of affordable housing
investments; the estimated increase for 2014 is
approximately $900 million. The effect of this guidance on
the Firm’s net income is not expected to be material.