Morgan Stanley 2014 Annual Report Download - page 172

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
of or one level below its business segments. For both the annual and interim tests, the Company has the option to
first assess qualitative factors to determine whether the existence of events or circumstances leads to a
determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.
If after assessing the totality of events or circumstances, the Company determines it is more likely than not that
the fair value of a reporting unit is greater than its carrying amount, then performing the two-step impairment test
is not required. However, if the Company concludes otherwise, then it is required to perform the first step of the
two-step impairment test. Goodwill impairment is determined by comparing the estimated fair value of a
reporting unit with its respective carrying value. If the estimated fair value exceeds the carrying value, goodwill
at the reporting unit level is not deemed to be impaired. If the estimated fair value is below carrying value,
however, further analysis is required to determine the amount of the impairment. Additionally, if the carrying
value of a reporting unit is zero or a negative value and it is determined that it is more likely than not the
goodwill is impaired, further analysis is required. The estimated fair values of the reporting units are derived
based on valuation techniques the Company believes market participants would use for each of the reporting
units.
The estimated fair values are generally determined by utilizing a discounted cash flow methodology or
methodologies that incorporate price-to-book and price-to-earnings multiples of certain comparable companies.
Goodwill is not amortized and is reviewed annually (or more frequently when certain events or circumstances
exist) for impairment. Other intangible assets are amortized over their estimated useful lives and reviewed for
impairment. Impairment losses are recorded within Other expenses in the Company’s consolidated statements of
income. There are no indefinite-lived intangible assets for years 2014 and 2013.
Investment Securities—Available for Sale and Held to Maturity.
AFS securities are reported at fair value in the Company’s consolidated statements of financial condition with
unrealized gains and losses reported in Accumulated other comprehensive income (loss) (“AOCI”), net of tax.
Interest and dividend income, including amortization of premiums and accretion of discounts, is included in
Interest income in the Company’s consolidated statements of income. Realized gains and losses on AFS
securities are reported in the Company’s consolidated statements of income (see Note 5). The Company utilizes
the “first-in, first-out” method as the basis for determining the cost of AFS securities.
Held to maturity (“HTM”) securities are reported at amortized cost in the Company’s consolidated statements of
financial condition. Interest income, including amortization of premiums and accretion of discounts on HTM
securities, is included in Interest income in the Company’s consolidated statements of income.
Other-than-temporary impairment. AFS debt securities and HTM securities with a current fair value less than
their amortized cost are analyzed as part of the Company’s periodic assessment of temporary versus other-than-
temporary impairment (“OTTI”) at the individual security level. A temporary impairment is recognized in AOCI.
OTTI is recognized in the Company’s consolidated statements of income with the exception of the non-credit
portion related to a debt security that the Company does not intend to sell and is not likely to be required to sell,
which is recognized in AOCI.
For AFS debt securities that the Company either has the intent to sell or that the Company is likely to be required
to sell before recovery of its amortized cost basis, the impairment is considered other-than-temporary.
For those AFS debt securities that the Company does not have the intent to sell or is not likely to be required to
sell, and for all HTM securities, the Company evaluates whether it expects to recover the entire amortized cost
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