Morgan Stanley 2010 Annual Report Download - page 221

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As a result of the Company’s repurchasing the Series D Preferred Stock, the Company incurred a one-time
negative adjustment of $850 million in its calculation of basic and diluted EPS (reduction to earnings (losses)
applicable to the Company’s common shareholders) for 2009 due to the accelerated amortization of the issuance
discount on the Series D Preferred Stock.
In August 2009, under the terms of the Capital Purchase Program securities purchase agreement, the Company
repurchased the Warrant from the U.S. Treasury in the amount of $950 million. The repurchase of the Series D
Preferred Stock, in the amount of $10.0 billion and the Warrant in the amount of $950 million, reduced the
Company’s total equity by $10,950 million in 2009.
Accumulated Other Comprehensive Income (Loss). At December 31, 2010 and December 31, 2009, the
components of the Company’s Accumulated other comprehensive loss are as follows (dollars in millions):
At
December 31,
2010
At
December 31,
2009
Foreign currency translation adjustments, net of tax ........................... $ 40 $ (26)
Amortization expense related to terminated cash flow hedges, net of tax .......... (18) (27)
Pension, postretirement and other related adjustments, net of tax ................ (525) (507)
Net unrealized gain on securities available for sale, net of tax ................... 36 —
Accumulated other comprehensive loss, net of tax ............................ $(467) $(560)
Cumulative Foreign Currency Translation Adjustments. Cumulative foreign currency translation adjustments
include gains or losses resulting from translating foreign currency financial statements from their respective
functional currencies to U.S. dollars, net of hedge gains or losses and related tax effects. The Company uses
foreign currency contracts and designates certain non-U.S. dollar currency debt as hedges to manage the currency
exposure relating to its net monetary investments in non-U.S. dollar functional currency subsidiaries. Increases or
decreases in the value of the Company’s net foreign investments generally are tax deferred for U.S. purposes, but
the related hedge gains and losses are taxable currently. The Company attempts to protect its net book value from
the effects of fluctuations in currency exchange rates on its net monetary investments in non-U.S. dollar
subsidiaries by selling the appropriate non-U.S. dollar currency in the forward market. Under some
circumstances, however, the Company may elect not to hedge its net monetary investments in certain foreign
operations due to market conditions, including the availability of various currency contracts at acceptable costs.
Information at December 31, 2010 and December 31, 2009 relating to the hedging of the Company’s net
monetary investments in non-U.S. dollar functional currency subsidiaries and their effects on cumulative foreign
currency translation adjustments is summarized below:
At
December 31,
2010
At
December 31,
2009
(dollars in millions)
Net monetary investments in non-U.S. dollar functional currency subsidiaries ...... $10,990 $9,325
Cumulative foreign currency translation adjustments resulting from net investments
in subsidiaries with a non-U.S. dollar functional currency .................... $ 544 $ 254
Cumulative foreign currency translation adjustments resulting from realized or
unrealized losses on hedges, net of tax ................................... (504) (280)
Total cumulative foreign currency translation adjustments, net of tax ............. $ 40 $ (26)
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