Morgan Stanley 2009 Annual Report Download - page 156

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Amount by Which Contractual Principal Amount Exceeds Fair Value
At
December 31,
2009
At
December 31,
2008
(dollars in billions)
Short-term and long-term debt borrowings(1) ..................... $ 1.9 $ 5.7
Loans(2) .................................................. 24.4 31.0
Loans 90 or more days past due(2)(3) ........................... 21.0 19.8
(1) These amounts do not include structured notes where the repayment of the initial principal amount fluctuates based on changes in the
reference price or index.
(2) The majority of this difference between principal and fair value amounts emanates from the Company’s distressed debt trading business,
which purchases distressed debt at amounts well below par.
(3) The aggregate fair value of loans that were 90 or more days past due as of December 31, 2009 and December 31, 2008 was $1.9 billion
and $2.0 billion, respectively.
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis.
2009.
Certain assets were measured at fair value on a non-recurring basis and are not included in the tables above.
These assets may include loans, equity method investments, premises and equipment, intangible assets and real
estate investments.
The following tables present, by caption on the consolidated statement of financial position, the fair value
hierarchy for those assets measured at fair value on a non-recurring basis for which the Company recognized an
impairment charge for 2009 and fiscal 2008, respectively.
Carrying Value at
December 31,
2009
Fair Value Measurements Using:
Total
Losses for
2009(1)
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
(dollars in millions)
Receivables—Other
loans(2) ................. $739 $— $— $739 $(269)
Other investments(3) ........ 66 — — 66 (39)
Premises, equipment and
software costs(4) ......... 8 — — 8 (5)
Intangible assets(4) .......... 3 — — 3 (4)
Other assets(5) ............. 9 — — 9 (16)
Total ..................... $825 $— $— $825 $(333)
(1) Impairment losses are recorded within Other expenses in the consolidated statement of income except for impairment losses related to
Receivables—other loans and Other investments, which are included in Other revenues.
(2) Impairment losses for loans were calculated based upon the fair value of the underlying collateral. The fair value of the collateral was
determined using internal expected recovery models.
(3) Impairment losses recorded were determined primarily using discounted cash flow models.
(4) Impairment losses related to the Institutional Securities business segment’s fixed income business.
(5) These impairment losses relate to buildings and properties held in the Asset Management business segment and are a result of the
continued adverse impact of economic conditions on domestic real estate markets. Fair values were generally determined using
discounted cash flow models or third-party appraisals and valuations.
In addition to the impairment losses included in the table above, impairment losses of approximately $466
million (of which $45 million related to Other investments, $12 million related to Intangible assets, and $409
million related to Other assets) were included in discontinued operations related to Crescent (see Note 23).
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