Morgan Stanley 2010 Annual Report Download - page 148

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Condensed statement of assets acquired and liabilities assumed. The following table summarizes the final fair
values of the assets acquired and liabilities assumed as of the acquisition date.
At May 31, 2009
(dollars in millions)
Assets
Cash and due from banks .............................................. $ 920
Financial instruments owned ........................................... 33
Receivables ......................................................... 1,667
Intangible assets ..................................................... 4,480
Other assets ......................................................... 881
Total assets acquired .............................................. $7,981
Liabilities
Financial instrument sold, not yet purchased ............................... $ 11
Long-term borrowings ................................................ 2,320
Other liabilities and accrued expenses .................................... 798
Total liabilities assumed ........................................... $3,129
Net assets acquired ............................................... $4,852
In addition, the Company recorded a receivable of approximately $1.1 billion relating to the fair value of the
Smith Barney delayed contribution businesses at May 31, 2009 from Citi. Such amount is presented in the
consolidated statements of financial condition as a reduction from noncontrolling interests.
Amortizable intangible assets included the following at May 31, 2009:
At May 31, 2009 Estimated Useful Life
(dollars in millions) (in years)
Customer relationships ........................................ $4,000 16
Research ................................................... 176 5
Intangible lease asset .......................................... 24 1-10
Total .................................................. $4,200
The Company also recorded an indefinite-lived intangible asset of approximately $280 million related to the
Smith Barney trade name.
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 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 goodwill amount of
approximately $136 million, which represents business synergies of combining the Citi Managed Futures
business with MSSB.
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