Morgan Stanley 2014 Annual Report Download - page 64

(8) The computation of average common equity for each business segment is determined using the Company’s Required Capital framework,
an internal capital adequacy measure (see “Liquidity and Capital Resources—Regulatory Requirements—Required Capital” herein).
Average common equity for each business segment is a non-GAAP financial measure that the Company considers to be a useful measure
to the Company and investors to assess capital adequacy.
(9) The calculation of each business segment’s return on average common equity uses income from continuing operations applicable to
Morgan Stanley less preferred dividends as a percentage of each business segment’s average common equity. The return on average
common equity is a non-GAAP financial measure that the Company considers to be a useful measure to the Company and investors to
assess operating performance. The effective tax rates used in the computation of business segments’ return on average common equity
were determined on a separate legal entity basis. To determine the return on consolidated average common equity, excluding the impact
of DVA, also a non-GAAP financial measure, both the numerator and the denominator were adjusted to exclude the impact of DVA. The
impact of DVA in 2014, 2013 and 2012 was 0.8%, (0.6)% and (5.1)%, respectively.
(10) Average tangible common equity is a non-GAAP financial measure that the Company considers to be a useful measure to the Company
and investors to assess capital adequacy. For a discussion of tangible common equity, see “Liquidity and Capital Resources—Capital
Management” herein.
(11) Return on average tangible common equity is a non-GAAP financial measure that the Company considers to be a useful measure to the
Company and investors to assess capital adequacy. The calculation of return on average tangible common equity uses income from
continuing operations applicable to Morgan Stanley less preferred dividends as a percentage of average tangible common equity. To
determine the return on average tangible common equity, excluding the impact of DVA, also a non-GAAP financial measure, both the
numerator and the denominator were adjusted to exclude the impact of DVA. The impact of DVA in 2014, 2013 and 2012 was 0.8%,
(0.7)% and (5.8)%, respectively.
(12) From time to time, the Company may disclose certain “non-GAAP financial measures” in the course of its earnings releases, earnings
conference calls, financial presentations and otherwise. For these purposes, “U.S. GAAP” refers to accounting principles generally
accepted in the U.S. The U.S. Securities and Exchange Commission (the “SEC”) defines a “non-GAAP financial measure” as a numerical
measure of historical or future financial performance, financial positions, or cash flows that excludes or includes amounts or is subject to
adjustments that effectively exclude, or include, amounts from the most directly comparable measure calculated and presented in
accordance with U.S. GAAP. Non-GAAP financial measures disclosed by the Company are provided as additional information to investors
in order to provide them with further transparency about, or as an alternative method for assessing, the Company’s financial condition and
operating results. These measures are not in accordance with, or a substitute for, U.S. GAAP, and may be different from or inconsistent
with non-GAAP financial measures used by other companies. Whenever the Company refers to a non-GAAP financial measure, the
Company will also generally present the most directly comparable financial measure calculated and presented in accordance with U.S.
GAAP, along with a reconciliation of the differences between the non-GAAP financial measure and the U.S. GAAP financial measure.
2014 2013 2012
Reconciliation of selected management financial measures from a Non-GAAP to a U.S. GAAP
basis (dollars in millions, except per share amounts):
Net revenues
Net revenues—non-GAAP ......................................................... $33,624 $33,174 $30,580
Impact of DVA .................................................................. 651 (681) (4,402)
Net revenues—U.S. GAAP ........................................................ $34,275 $32,493 $26,178
Income from continuing operations applicable to Morgan Stanley
Income applicable to Morgan Stanley—non-GAAP ..................................... $ 3,063 $ 3,427 $ 3,256
Impact of DVA .................................................................. 418 (452) (3,118)
Income applicable to Morgan Stanley—U.S. GAAP ..................................... $ 3,481 $ 2,975 $ 138
Earnings per diluted common share
Income from continuing operations per diluted common share—non-GAAP .................. $ 1.39 $ 1.61 $ 1.64
Impact of DVA .................................................................. 0.22 (0.23) (1.62)
Income from continuing operations per diluted common share—U.S. GAAP ................. $ 1.61 $ 1.38 $ 0.02
(13) Amounts include loans held for investment and loans held for sale and exclude loans at fair value which are included in Trading assets in
the Company’s consolidated statements of financial condition (see Note 8 to the Company’s consolidated financial statements in Item 8).
(14) Morgan Stanley Bank, N.A. (“MSBNA”) and Morgan Stanley Private Bank, National Association (“MSPBNA”) represent the
Company’s U.S. bank operating subsidiaries (“U.S. Subsidiary Banks”) and amounts exclude transactions with affiliated entities.
(15) Book value per common share equals common shareholders’ equity of $64,880 million at December 31, 2014 and $62,701 million at
December 31, 2013 divided by common shares outstanding of 1,951 million at December 31, 2014 and 1,945 million at December 31, 2013.
(16) Tangible book value per common share equals tangible common equity of $55,138 million at December 31, 2014 and $52,828 million at
December 31, 2013 divided by common shares outstanding of 1,951 million at December 31, 2014 and 1,945 million at December 31,
2013. Tangible book value per common share is a non-GAAP financial measure that the Company considers to be a useful measure that
the Company and investors use to assess capital adequacy.
(17) Global Liquidity Reserve, which is held within the Company’s bank and non-bank legal entities, is composed of highly liquid and
diversified cash and cash equivalents and unencumbered securities. Eligible unencumbered securities include U.S. government securities,
60