Morgan Stanley 2009 Annual Report Download - page 126

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
MSCI Inc. In May 2009, the Company divested all of its remaining ownership interest in MSCI Inc. (“MSCI”).
The results of MSCI are reported as discontinued operations for all periods presented. The results of MSCI were
formerly included within the Institutional Securities business segment.
Crescent. Discontinued operations in 2009, fiscal 2008 and the one month ended December 31, 2008 include
operating results and gains (losses) related to the disposition of Crescent Real Estate Equities Limited Partnership
(“Crescent”), a former real estate subsidiary of the Company. The Company completed the disposition of
Crescent in the fourth quarter of 2009, whereby the Company transferred its ownership interest in Crescent to
Crescent’s primary creditor in exchange for full release of liability on the related loans. The results of Crescent
were formerly included in the Asset Management business segment.
Discover. On June 30, 2007, the Company completed the spin-off (the “Discover Spin-off”) of its business
segment Discover Financial Services (“DFS”) to its shareholders. The results of DFS are reported as
discontinued operations for all periods presented through the date of the Discover Spin-off. Fiscal 2008 included
costs related to a legal settlement between DFS, VISA and MasterCard. See Note 27 for further information
regarding settlement with DFS.
Quilter Holdings Ltd. The results of Quilter Holdings Ltd. (“Quilter”), Global Wealth Management Group’s
former mass affluent business in the United Kingdom (“U.K.”), are also reported as discontinued operations for
all periods presented through its sale to Citigroup Inc. (“Citi”) on February 28, 2007. Citi subsequently
contributed Quilter to the MSSB joint venture. The results of MSSB are included within the Global Wealth
Management Group business segment’s income from continuing operations effective May 31, 2009.
See Note 23 for additional information on discontinued operations.
Basis of Financial Information. The consolidated financial statements for 2009, fiscal 2008, fiscal 2007 and
the one month ended December 31, 2008 are prepared in accordance with accounting principles generally
accepted in the U.S., which require the Company to make estimates and assumptions regarding the valuations of
certain financial instruments, the valuation of goodwill, tax matters and other matters that affect the consolidated
financial statements and related disclosures. The Company believes that the estimates utilized in the preparation
of the consolidated financial statements are prudent and reasonable. Actual results could differ materially from
these estimates.
All material intercompany balances and transactions have been eliminated.
Consolidation. The consolidated financial statements include the accounts of the Company, its wholly owned
subsidiaries and other entities in which the Company has a controlling financial interest, including certain
variable interest entities (“VIEs”). The Company adopted accounting guidance for non-controlling interests on
January 1, 2009. Accordingly, for consolidated subsidiaries that are less than wholly owned, the third-party
holdings of equity interests are referred to as non-controlling interests. The portion of net income attributable to
non-controlling interests for such subsidiaries is presented as Net income (loss) applicable to non-controlling
interests on the consolidated statements of income, and the portion of the shareholders’ equity of such
subsidiaries is presented as Non-controlling interests in the consolidated statements of financial condition and
consolidated statements of changes in total equity.
For entities where (1) the total equity investment at risk is sufficient to enable the entity to finance its activities
independently and (2) the equity holders bear the economic residual risks of the entity and have the right to make
decisions about the entity’s activities, the Company consolidates those entities it controls through a majority
voting interest or otherwise. For entities that do not meet these criteria, commonly known as VIEs, the Company
consolidates those entities where the Company is deemed to be the primary beneficiary when it absorbs a
majority of the expected losses or a majority of the expected residual returns, or both, of such entities.
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