Morgan Stanley 2015 Annual Report Download - page 134

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
subsidiaries that is attributable to noncontrolling interests for such subsidiaries is presented as Nonredeemable noncontrolling
interests, a component of total equity, in the consolidated statements of financial condition.
For entities where (1) the total equity investment at risk is sufficient to enable the entity to finance its activities without
additional subordinated financial support and (2) the equity holders bear the economic residual risks and returns of the entity
and have the power to direct the activities of the entity that most significantly affect its economic performance, the Company
consolidates those entities it controls either through a majority voting interest or otherwise. For VIEs (i.e., entities that do not
meet these criteria), the Company consolidates those entities where it has the power to make the decisions that most
significantly affect the economic performance of the VIE and has the obligation to absorb losses or the right to receive
benefits that could potentially be significant to the VIE, except for certain VIEs that are money market funds, are investment
companies or are entities qualifying for accounting purposes as investment companies. Generally, the Company consolidates
those entities when it absorbs a majority of the expected losses or a majority of the expected residual returns, or both, of the
entities.
For investments in entities in which the Company does not have a controlling financial interest but has significant influence
over operating and financial decisions, it generally applies the equity method of accounting with net gains and losses
recorded within Other revenues (see Note 8). Where the Company has elected to measure certain eligible investments at fair
value in accordance with the fair value option, net gains and losses are recorded within Investments revenues (see Note 3).
Equity and partnership interests held by entities qualifying for accounting purposes as investment companies are carried at
fair value.
The Company’s significant regulated U.S. and international subsidiaries include Morgan Stanley & Co. LLC (“MS&Co.”),
Morgan Stanley Smith Barney LLC (“MSSB LLC”), Morgan Stanley & Co. International plc (“MSIP”), Morgan Stanley
MUFG Securities Co., Ltd. (“MSMS”), Morgan Stanley Bank, N.A. (“MSBNA”) and Morgan Stanley Private Bank,
National Association (“MSPBNA”).
Consolidated Statements of Income Presentation.
The Company, through its subsidiaries and affiliates, provides a wide variety of products and services to a large and
diversified group of clients. In connection with the delivery of these various products and services, the Company manages its
revenues and related expenses in the aggregate. As such, when assessing the performance of its businesses, primarily in the
Institutional Securities business segment, the Company considers its trading, investment banking, commissions and fees, and
interest income, along with the associated interest expense, as one integrated activity.
Consolidated Statements of Cash Flows Presentation.
For purposes of the consolidated statements of cash flows, cash and cash equivalents consist of Cash and due from banks and
Interest bearing deposits with banks, which include highly liquid investments with original maturities of three months or less,
that are held for investment purposes, and are readily convertible to known amounts of cash.
During 2015 and 2014, the Company deconsolidated approximately $244 million and $1.6 billion, respectively, in net assets
previously attributable to nonredeemable noncontrolling interests that were primarily related to or associated with real estate
funds sponsored by the Company. The deconsolidations resulted in non-cash reduction of assets of $222 million in 2015 and
$1.3 billion in 2014.
The Company’s significant non-cash activities in 2013 included assets and liabilities of approximately $3.6 billion and $3.1
billion, respectively, disposed of in connection with business dispositions.
Dispositions.
On November 1, 2015, the Company completed the sale of its global oil merchanting unit of the commodities division to
Castleton Commodities International LLC. The loss on sale of approximately $71 million was recognized in Other revenues.
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