Morgan Stanley 2010 Annual Report Download - page 226

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
with the sale of the undivided participating interests in a portion of the claims, the Company provided certain
representations and warranties related to the allowance of the amount stated in the claims submitted to the
bankruptcy court. The bankruptcy court will be evaluating all of the claims filed against the derivative
counterparty. To the extent, in the future, any portion of the stated claims is disallowed or reduced by the
bankruptcy court in excess of a certain amount, then the Company must refund a portion of the purchase price
plus interest from the date of the participation agreements to the repayment date. The maximum amount that the
Company could be required to refund is the total proceeds of $429 million plus interest. The Company recorded a
liability for the fair value of this possible disallowance. The fair value was determined by assessing mid-market
values of the underlying transactions, where possible, prevailing bid-offer spreads around the time of the
bankruptcy filing, and applying valuation adjustments related to estimating unwind costs. The investors,
however, bear full price risk associated with the allowed claims as it relates to the liquidation proceeds from the
bankruptcy estate. The Company also agreed to service the claims and, as such, recorded a liability for the fair
value of the servicing obligation. The Company continues to measure these obligations at fair value with changes
in fair value recorded in earnings. The change in fair value recorded in earnings in 2010 was immaterial. These
obligations are reflected in the consolidated statement of financial condition as Financial instruments sold, not
yet purchased—Derivatives and other contracts, in Note 4 as Level 3 instruments, and in Note 12 as Derivatives
not designated as accounting hedges. The disallowance obligation is also reflected in Note 13 in the guarantees
table.
19. Other Revenues.
Details of Other revenues were as follows:
2010 2009
Fiscal
2008
One Month
Ended
December 31,
2008
(dollars in millions)
Gain on China International Capital Corporation Limited (see Note
24)...................................................... $ 668 $— $ — $—
Gain on sale of Invesco shares (see Note 1) ........................ 102 — — —
FrontPoint impairment charges (see Note 28) ...................... (126) — — —
Gain on repurchase of long-term debt (see Note 11) ................. — 491 2,252 73
Morgan Stanley Wealth Management S.V., S.A.U.(1) ............... — — 743 —
Other ...................................................... 857 346 856 36
Total .................................................. $1,501 $837 $3,851 $109
(1) In the second quarter of fiscal 2008, the Company sold Morgan Stanley Wealth Management S.V., S.A.U. (“MSWM S.V.”), its Spanish
onshore mass affluent wealth management business. The results of MSWM S.V. are included within the Global Wealth Management
Group business segment through the date of sale.
20. Employee Stock-Based Compensation Plans.
The accounting guidance for stock-based compensation requires measurement of compensation cost for equity-
based awards at fair value and recognition of compensation cost over the service period, net of estimated
forfeitures (see Note 2).
220