Morgan Stanley 2010 Annual Report Download - page 179

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The Company determines whether it is the primary beneficiary of a VIE upon its initial involvement with the
VIE and reassesses whether it is the primary beneficiary on an ongoing basis as long as it has any continuing
involvement with the VIE. This determination is based upon an analysis of the design of the VIE, including the
VIE’s structure and activities, the power to make significant economic decisions held by the Company and by
other parties, and the variable interests owned by the Company and other parties.
The power to make the most important economic decisions may take a number of different forms in different
types of VIEs. The Company considers servicing or collateral management decisions as representing the power
to make the most important economic decisions in transactions such as securitizations or collateral debt
obligations.
For many transactions, such as CLNs and other asset-repackaged notes, there are no significant economic
decisions made on an ongoing basis. In these cases, the Company focuses its analysis on decisions made prior to
the initial closing of the transaction and at the termination of the transaction. Based upon factors, which include
an analysis of the nature of the assets, the number of investors, the standardization of the legal documentation
and the level of the continuing involvement by the Company, the Company concluded in most of these
transactions that decisions made prior to the initial closing were shared between the Company and the initial
investors. The Company focused its control decision on any right held by the Company or investors related to the
termination of the VIE.
Except for consolidated VIEs included in other structured financings in the tables below, the Company accounts
for the assets held by the entities primarily in Financial instruments owned and the liabilities of the entities as
Other secured financings in the consolidated statements of financial condition. The Company includes assets held
by consolidated VIEs included in other structured financings in the tables below primarily in Receivables,
Premises, equipment and software costs, and Other assets and the liabilities primarily as Other liabilities and
accrued expenses and Payables in the consolidated statements of financial condition. Except for consolidated
VIEs included in other structured financings, the assets and liabilities are measured at fair value, with changes in
fair value reflected in earnings.
The assets owned by many consolidated VIEs cannot be removed unilaterally by the Company and are not
generally available to the Company. The related liabilities issued by many consolidated VIEs are non-recourse to
the Company. In certain other consolidated VIEs, the Company has the unilateral right to remove assets or
provides additional recourse through derivatives such as total return swaps, guarantees or other forms of
involvement.
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