Morgan Stanley 2009 Annual Report Download - page 138

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Citi Managed Futures. Citi contributed its managed futures business and certain related proprietary trading
positions to MSSB on July 31, 2009 (“Citi Managed Futures”). The Company paid Citi approximately
$300 million in cash in connection with this transfer. As of July 31, 2009, Citi Managed Futures was wholly-
owned and consolidated by MSSB, of which the Company owns 51% and Citi owns 49%.
The Company accounted for this transaction using the acquisition method of accounting. The fair value of the
total consideration transferred to Citi was approximately $300 million and the preliminary increase in fair value
of Citi’s equity in MSSB was approximately $289 million. The acquisition method of accounting prescribes the
full goodwill method even in business combinations in which the acquirer holds less than 100% of the equity
interests in the acquiree at acquisition date. Accordingly, the full fair value of Citi Managed Futures was
allocated to the fair value of the assets acquired and liabilities assumed to derive the preliminary goodwill
amount of approximately $136 million, which represents business synergies of combining the Citi Managed
Futures business with MSSB. The Company is still finalizing the valuation of the intangible assets. When
finalized, the amount of intangible assets and acquisition-related goodwill could change.
The following table summarizes the preliminary allocation of the purchase price to the net assets of Citi Managed
Futures as of July 31, 2009 (dollars in millions).
Total fair value of consideration transferred ......................................... $300
Total fair value of non-controlling interest .......................................... 289
Total fair value of Citi Managed Futures ........................................... 589
Total fair value of net assets acquired .............................................. 453
Preliminary acquisition-related goodwill(1) ......................................... $136
(1) Goodwill is recorded within the Global Wealth Management Group business segment. The Company is currently evaluating the amount
of goodwill deductible for tax purposes.
Condensed statement of assets acquired and liabilities assumed. The following table summarizes the
preliminary fair values of the assets acquired and liabilities assumed as of the acquisition date. The allocation of
the purchase price is preliminary and subject to further adjustment as the valuation of certain intangible assets is
still in process.
At July 31, 2009
(dollars in millions)
Assets
Financial instruments owned ........................................... $ 83
Receivables ......................................................... 86
Intangible assets ..................................................... 275
Other assets ......................................................... 11
Total assets acquired .............................................. $455
Liabilities
Other liabilities and accrued expenses .................................... $ 2
Total liabilities assumed ........................................... $ 2
Net assets acquired ............................................... $453
As of July 31, 2009, amortizable intangible assets in the amount of $275 million primarily related to management
contracts with an estimated useful life of five to nine years.
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