Morgan Stanley 2010 Annual Report Download - page 145

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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 required that the tax benefit related to dividend equivalents paid on RSUs 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 required 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); established the acquisition-date fair value as the measurement
objective for all assets acquired and liabilities assumed; required expensing of most transaction and restructuring
costs; and required 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 applied 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 removed 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 replaced 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.
Instruments Indexed to an Entity’s Own Stock. In June 2008, the FASB ratified the consensus reached for
determining whether an equity-linked financial instrument (or embedded feature) is indexed to an entity’s own
stock. The accounting guidance applied to any freestanding financial instrument or embedded feature that has all
of the characteristics of a derivative or freestanding instrument that is potentially settled in an entity’s own stock
with certain exceptions. To meet the definition of “indexed to own stock,” an instrument’s contingent exercise
provisions must not be based on (a) an observable market, other than the market for the issuer’s stock (if
applicable), or (b) an observable index, other than an index calculated or measured solely by reference to the
issuer’s own operations, and the variables that could affect the settlement amount must be inputs to the fair value
of a “fixed-for-fixed” forward or option on equity shares. The adoption of the guidance on January 1, 2009 did
not change the classification or measurement of the Company’s financial instruments.
Subsequent Events. In May 2009, the FASB issued accounting guidance to establish general standards of
accounting for and disclosure of events that occur after the balance sheet date but before financial statements are
139