Morgan Stanley 2009 Annual Report Download - page 133

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
in January 2010). The Company believes that this method of recognition for retirement-eligible employees is
preferable because it better reflects the period over which the compensation is earned.
Translation of Foreign Currencies.
Assets and liabilities of operations having non-U.S. dollar functional currencies are translated at year-end rates of
exchange, and income statement accounts are translated at weighted average rates of exchange for the year.
Gains or losses resulting from translating foreign currency financial statements, net of hedge gains or losses and
related tax effects, are reflected in Accumulated other comprehensive income (loss), a separate component of
Morgan Stanley Shareholders’ equity on the consolidated statement of financial condition. Gains or losses
resulting from remeasurement of foreign currency transactions are included in net income.
Goodwill and Intangible Assets.
Goodwill and indefinite-lived intangible assets are not amortized and are reviewed annually (or more frequently
when certain events or circumstances exist) for impairment. Other intangible assets are amortized over their
estimated useful lives and reviewed for impairment.
Securities Available for Sale.
Beginning in the second quarter of fiscal 2007, the Company purchased certain debt securities that were
classified as “securities available for sale” in accordance with accounting guidance for certain investments in
debt and equity securities. During fiscal 2007, the Company recorded an other-than-temporary impairment
charge of $437 million in Principal transactions–trading revenues in the consolidated statement of income.
Deferred Compensation Arrangements.
Rabbi Trust. The Company maintains trusts, commonly referred to as rabbi trusts, in connection with certain
deferred compensation plans. Assets of rabbi trusts are consolidated, and the value of the Company’s stock held
in rabbi trusts is classified in Morgan Stanley Shareholders’ equity and generally accounted for in a manner
similar to treasury stock. The Company has included its obligations under certain deferred compensation plans in
Employee stock trust. Shares that the Company has issued to its rabbi trusts are recorded in Common stock
issued to employee trust. Both Employee stock trust and Common stock issued to employee trust are components
of Morgan Stanley Shareholders’ equity. The Company recognizes the original amount of deferred compensation
(fair value of the deferred stock award at the date of grant—see Note 18) as the basis for recognition in Employee
stock trust and Common stock issued to employee trust. Changes in the fair value of amounts owed to employees
are not recognized as the Company’s deferred compensation plans do not permit diversification and must be
settled by the delivery of a fixed number of shares of the Company’s common stock.
Deferred Compensation Plans. The Company also maintains various deferred compensation plans for the
benefit of certain employees that provide a return to the participating employees based upon the performance of
various referenced investments. The Company often invests directly, as a principal, in such referenced
investments related to its obligations to perform under the deferred compensation plans. Changes in value of such
investments made by the Company are recorded primarily in Principal transactions—investments. Expenses
associated with the related deferred compensation plans are recorded in Compensation and benefits.
Employee Loans.
At December 31, 2009 and December 31, 2008, the Company had $3.5 billion and $1.9 billion, respectively, of
loans outstanding to certain employees. These loans are full-recourse, require periodic payment terms and have
repayment terms ranging from 4 to 12 years.
Accounting Developments.
Accounting for Uncertainty in Income Taxes. In July 2006, the FASB issued accounting guidance
which clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements
and prescribes a recognition threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in an income tax return. It also provides guidance on
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