Morgan Stanley 2015 Annual Report Download - page 135

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
On July 1, 2014, the Company completed the sale of its ownership stake in TransMontaigne Inc., a U.S.-based oil storage,
marketing and transportation company, as well as related physical inventory and the assumption of its obligations under
certain terminal storage contracts, to NGL Energy Partners LP. The gain on sale of $112 million is recorded in Other
revenues.
On March 27, 2014, the Company completed the sale of Canterm Canadian Terminals Inc., a public storage terminal operator
for refined products with two distribution terminals in Canada. The gain on sale was approximately $45 million and is
recorded in Other revenues.
2. Significant Accounting Policies.
Revenue Recognition.
Investment Banking.
Underwriting revenues and advisory fees from mergers, acquisitions and restructuring transactions are recorded when
services for the transactions are determined to be substantially completed, generally as set forth under the terms of the
engagement. Transaction-related expenses, primarily consisting of legal, travel and other costs directly associated with the
transaction, are deferred and recognized in the same period as the related investment banking transaction revenues.
Underwriting revenues are presented net of related expenses. Non-reimbursed expenses associated with advisory transactions
are recorded within Non-interest expenses.
Commissions and Fees.
Commission and fee revenues are recognized on trade date. Commission and fee revenues primarily arise from agency
transactions in listed and over-the-counter (“OTC”) equity securities; services related to sales and trading activities; and sales
of mutual funds, futures, insurance products and options.
Asset Management, Distribution and Administration Fees.
Asset management, distribution and administration fees are recognized over the relevant contract period. Sales commissions
paid by the Company in connection with the sale of certain classes of shares of its open-end mutual fund products are
accounted for as deferred commission assets. The Company periodically tests the deferred commission assets for
recoverability based on cash flows expected to be received in future periods. In certain management fee arrangements, the
Company is entitled to receive performance-based fees (also referred to as incentive fees and includes carried interest) when
the return on assets under management exceeds certain benchmark returns or other performance targets. In such
arrangements, performance fee revenues are accrued (or reversed) quarterly based on measuring account/fund performance to
date versus the performance benchmark stated in the investment management agreement. Performance-based fees are
recorded within Investments or Asset management, distribution and administration fees depending on the nature of the
arrangement. The Company’s portion of the unrealized cumulative amount of performance-based fee revenue (for which the
Company is not obligated to pay compensation) at risk of reversing if fund performance falls below stated investment
management agreement benchmarks was approximately $363 million and $634 million at December 31, 2015 and
December 31, 2014, respectively. See Note 12 for information regarding general partner guarantees, which include potential
obligations to return performance fee distributions previously received.
Trading and Investments.
See “Fair Value of Financial Instruments” below for Trading and Investments revenue recognition discussions.
Fair Value of Financial Instruments.
Instruments within Trading assets and Trading liabilities are measured at fair value, either in accordance with accounting
guidance or through the fair value option election (discussed below). These financial instruments primarily represent the
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