Morgan Stanley 2014 Annual Report Download - page 233

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Employee Loans.
Employee loans are granted primarily in conjunction with a program established in the Company’s Wealth
Management business segment to retain and recruit certain employees. These loans are recorded in Customer and
other receivables in the Company’s consolidated statements of financial condition. These loans are full recourse,
generally require periodic payments and have repayment terms ranging from one to 12 years. The Company
establishes a reserve for loan amounts it does not consider recoverable, which is recorded in Compensation and
benefits expense. At December 31, 2014, the Company had $5,130 million of employee loans, net of an
allowance of approximately $116 million. At December 31, 2013, the Company had $5,487 million of employee
loans, net of an allowance of approximately $109 million.
The Company has also granted loans to other employees primarily in conjunction with certain after-tax leveraged
investment arrangements. At December 31, 2014, the balance of these loans was $40 million, net of an allowance
of approximately $42 million. At December 31, 2013, the balance of these loans was $100 million, net of an
allowance of approximately $51 million. The Company establishes a reserve for non-recourse loan amounts not
recoverable from employees, which is recorded in Other expense.
9. Goodwill and Net Intangible Assets.
The Company completed its annual goodwill impairment testing on July 1, 2014 and July 1, 2013. The
Company’s impairment testing for each period did not indicate any goodwill impairment as each of the
Company’s reporting units with goodwill had a fair value that was substantially in excess of its carrying value.
Adverse market or economic events could result in impairment charges in future periods.
Goodwill.
Changes in the carrying amount of the Company’s goodwill, net of accumulated impairment losses for 2014 and
2013, were as follows:
Institutional
Securities
Wealth
Management(1)
Investment
Management(1) Total
(dollars in millions)
Goodwill at December 31, 2012(2) .................. $337 $5,544 $769 $6,650
Foreign currency translation adjustments and other ...... (27) — — (27)
Goodwill disposed of during the period(3)(4) ........... (17) (11) — (28)
Goodwill at December 31, 2013(2) .................. $293 $5,533 $769 $6,595
Foreign currency translation adjustments and other ...... (14) — — (14)
Goodwill acquired during the period(5) ................ 7 — — 7
Goodwill at December 31, 2014(2) .................. $286 $5,533 $769 $6,588
(1) On October 1, 2014, the Managed Futures business was transferred from the Company’s Wealth Management business segment to the
Company’s Investment Management business segment. All prior-period amounts have been recast to conform to the current year’s
presentation.
(2) The amount of the Company’s goodwill before accumulated impairments of $700 million, which included $673 million related to the
Company’s Institutional Securities business segment and $27 million related to the Company’s Investment Management business
segment, was $7,288 million and $7,295 million at December 31, 2014 and December 31, 2013, respectively.
(3) In 2011, the Company announced that it had reached an agreement with the employees of its in-house quantitative proprietary trading
unit, Process Driven Trading (“PDT”), within the Company’s Institutional Securities business segment, whereby PDT employees
acquired certain assets from the Company and launched an independent advisory firm. This transaction closed on January 1, 2013.
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