Morgan Stanley 2010 Annual Report Download - page 168

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the One Month
Ended December 31, 2008
Beginning
Balance at
November 30,
2008
Total
Realized
and
Unrealized
Gains
(Losses)(1)
Purchases,
Sales,
Other
Settlements
and
Issuances,
net
Net Transfers
In and/or
(Out) of
Level 3
Ending
Balance at
December 31,
2008
Unrealized
Gains (Losses)
for Level 3
Assets/
Liabilities
Outstanding at
December 31,
2008(2)
(dollars in millions)
Assets
Financial instruments owned:
U.S. agency securities ......... $ 206 $ (3) $ (76) $ — $ 127 $ (5)
Other sovereign government
obligations ................ 3 — (1) (1) 1 —
Corporate and other debt ....... 34,460 (393) 1,036 (185) 34,918 (378)
Corporate equities ............ 907 (11) (3) 83 976 (10)
Net derivative and other
contracts(3) ............... 27,624 (2,040) (43) (2,159) 23,382 (1,879)
Investments ................. 9,732 (169) 149 (14) 9,698 (158)
Securities received as collateral ..... 15 — 15 — 30 —
Intangible assets ................. 220 (36) — — 184 (36)
Liabilities
Financial instruments sold, not yet
purchased:
Corporate and other debt ....... $ 3,943 $ (43) $ (140) $ (38) $ 3,808 $ (63)
Corporate equities ............ 21 (20) (20) 6 27 1
Obligation to return securities received
as collateral ................... 15 — 15 — 30 —
Other secured financings ........... 5,747 (219) 34 148 6,148 (219)
Long-term borrowings ............. 5,417 (52) 4 — 5,473 (51)
(1) Total realized and unrealized gains (losses) are primarily included in Principal transactions—Trading in the consolidated statements of
income except for $(169) million related to Financial instruments owned—Investments, which is included in Principal transactions—
Investments.
(2) Amounts represent unrealized gains (losses) for the one month ended December 31, 2008 related to assets and liabilities still outstanding
at December 31, 2008.
(3) Net derivative and other contracts represent Financial instruments owned—Derivative and other contracts, net of Financial instruments
sold, not yet purchased—Derivative and other contracts. For further information on derivative instruments and hedging activities, see
Note 12.
Financial instruments owned—Net derivative and other contracts. The net losses in Net derivative and other
contracts were primarily driven by tightening of credit spreads on underlying reference entities of certain basket
credit default swaps, single name credit default swaps and corporate tranche-indexed credit default swaps.
The Company reclassified certain Net derivative contracts from Level 3 to Level 2. The reclassifications were
primarily related to corporate tranche-indexed credit default swaps. The reclassifications were due to an increase
in transaction data, available broker quotes and/or available consensus pricing, such that significant inputs for the
fair value measurement were observable.
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