Morgan Stanley 2009 Annual Report Download - page 134

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a
result of the adoption of this accounting guidance on December 1, 2007, the Company recorded a cumulative
effect adjustment of approximately $92 million as a decrease to the opening balance of Retained earnings as of
December 1, 2007 (see Note 20).
Employee Benefit Plans. In September 2006, the FASB issued accounting guidance for pension and other post
retirement plans. In fiscal 2007, the Company adopted the requirement to recognize the overfunded or
underfunded status of its defined benefit and postretirement plans as an asset or liability. In the first quarter of
fiscal 2008, the Company recorded an after-tax charge of approximately $13 million ($21 million pre-tax) to
Shareholders’ equity upon early adoption of the requirement to use the fiscal year-end date as the measurement
date (see Note 19).
Dividends on Share-Based Payment Awards. In June 2007, the Emerging Issues Task Force reached consensus
on accounting for tax benefits of dividends on share-based payment awards to employees. The accounting
guidance requires that the tax benefit related to dividend equivalents paid on restricted stock units that are
expected to vest be recorded as an increase to additional paid-in capital. The Company adopted this
guidance prospectively effective December 1, 2008. The Company previously accounted for this tax benefit as a
reduction to its income tax provision. The adoption of the accounting guidance did not have a material impact on
the Company’s consolidated financial statements.
Business Combinations. In December 2007, the FASB issued accounting guidance that requires the acquiring
entity in a business combination to recognize the full fair value of assets acquired and liabilities assumed in the
transaction (whether a full or partial acquisition); establishes the acquisition-date fair value as the measurement
objective for all assets acquired and liabilities assumed; requires expensing of most transaction and restructuring
costs; and requires the acquirer to disclose to investors and other users all of the information needed to evaluate
and understand the nature and financial effect of the business combination. The accounting guidance applies to
all transactions or other events in which the Company obtains control of one or more businesses, including those
sometimes referred to as “true mergers” or “mergers of equals” and combinations achieved without the transfer
of consideration, for example, by contract alone or through the lapse of minority veto rights. The Company
adopted the accounting guidance prospectively on January 1, 2009.
Transfers of Financial Assets and Repurchase Financing Transactions. In February 2008, the FASB issued
implementation guidance for accounting for transfers of financial assets and repurchase financing transactions.
Under this guidance, there is a presumption that an initial transfer of a financial asset and a repurchase financing
are considered part of the same arrangement (i.e., a linked transaction) for purposes of evaluation. If certain
criteria are met, however, the initial transfer and repurchase financing shall not be evaluated as a linked
transaction and shall be evaluated separately. The adoption of the guidance on December 1, 2008 did not have a
material impact on the Company’s consolidated financial statements.
Determination of the Useful Life of Intangible Assets. In April 2008, the FASB issued guidance on the
determination of the useful life of intangible assets. The guidance removes the requirement for an entity to
consider, when determining the useful life of an acquired intangible asset, whether the intangible asset can be
renewed without substantial cost or material modifications to the existing terms and conditions associated with
the intangible asset. The guidance replaces the previous useful-life assessment criteria with a requirement that an
entity shall consider its own experience in renewing similar arrangements. If the entity has no relevant
experience, it would consider market participant assumptions regarding renewal. The adoption of the guidance on
January 1, 2009 did not have a material impact on the Company’s consolidated financial statements.
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