Morgan Stanley 2009 Annual Report Download - page 155

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Fair Value Option.
The Company elected the fair value option for certain eligible instruments that are risk managed on a fair value
basis. The following tables present net gains (losses) due to changes in fair value for items measured at fair value
pursuant to the fair value option election for 2009, fiscal 2008, fiscal 2007 and the one month ended
December 31, 2008.
Principal
Transactions-
Trading
Interest
Expense
(Losses) Gains
Included in
Net Revenues
(dollars in millions)
2009
Commercial paper and other short-term borrowings .................. $ (176) $ — $ (176)
Deposits .................................................... (81) (321) (402)
Long-term borrowings ......................................... (7,351) (983) (8,334)
Fiscal 2008
Commercial paper and other short-term borrowings .................. $ 1,238 $ (2) $ 1,236
Deposits .................................................... 14 — 14
Long-term borrowings ......................................... 10,924 (1,059) 9,865
Fiscal 2007
Commercial paper and other short-term borrowings .................. $ (326) $ (5) $ (331)
Deposits .................................................... (5) — (5)
Long-term borrowings ......................................... (481) (366) (847)
One month ended December 31, 2008
Commercial paper and other short-term borrowings .................. $ (81) $ — $ (81)
Deposits .................................................... (120) (26) (146)
Long-term borrowings ......................................... (1,597) (80) (1,677)
In addition to the amounts in the above table, as discussed in Note 2, all of the instruments within Financial
instruments owned or Financial instruments sold, not yet purchased are measured at fair value, either through the
election of the fair value option, or as required by other accounting pronouncements.
The following table presents information on the Company’s short-term and long-term borrowings (including
structured notes and junior subordinated debentures), loans and unfunded lending commitments for which
the fair value option was elected:
(Losses) Gains Due to Changes in Instrument Specific Credit Spreads
2009
Fiscal
2008
Fiscal
2007
One Month
Ended
December 31,
2008
(dollars in millions)
Short-term and long-term borrowings(1) ...................... $(5,510) $ 5,594 $ 840 $(241)
Loans(2) ................................................ 4,139 (5,864) (2,258) (498)
Unfunded lending commitments(3) ........................... (8) 280 (291) 6
(1) Gains (losses) were attributable to widening or (tightening), respectively, of the Company’s credit spreads and were determined based
upon observations of the Company’s secondary bond market spreads. The remainder of changes in overall fair value of the short-term
and long-term borrowings is attributable to changes in foreign currency exchange rates and interest rates and movements in the reference
price or index for structured notes.
(2) Instrument-specific credit gains or (losses) were determined by excluding the non-credit components of gains and losses, such as those
due to changes in interest rates.
(3) Gains (losses) were generally determined based on the differential between estimated expected client and contractual yields at each
respective period end.
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