PNC Bank 2007 Annual Report Download - page 119

N OTE 26 S EGMENT R EPORTING
We have four major businesses engaged in providing banking,
asset management and global fund processing products and
services:
• Retail Banking,
• Corporate & Institutional Banking,
• BlackRock, and
• PFPC.
Results of individual businesses are presented based on our
management accounting practices and our management
structure. There is no comprehensive, authoritative body of
guidance for management accounting equivalent to GAAP;
therefore, the financial results of individual businesses are not
necessarily comparable with similar information for any other
company. We refine our methodologies from time to time as
our management accounting practices are enhanced and our
businesses and management structure change. Financial
results are presented, to the extent practicable, as if each
business, with the exception of our BlackRock segment,
operated on a stand-alone basis. As permitted under GAAP,
we have aggregated the business results for certain operating
segments for financial reporting purposes.
Assets receive a funding charge and liabilities and capital
receive a funding credit based on a transfer pricing
methodology that incorporates product maturities, duration
and other factors. Capital is intended to cover unexpected
losses and is assigned to the banking and processing
businesses using our risk-based economic capital model. We
have assigned to Retail Banking capital equal to 6% of funds
to reflect the capital required for well-capitalized banks and to
approximate market comparables for this business. The capital
assigned for PFPC reflects its legal entity shareholders' equity.
BlackRock business segment results for 2005 and the first
nine months of 2006 reflected our majority ownership in
BlackRock during that period. Subsequent to the
September 29, 2006 BlackRock/MLIM transaction closing,
which had the effect of reducing our ownership interest to
approximately 34%, our investment in BlackRock has been
accounted for under the equity method but continues to be a
separate reportable business segment of PNC. The fair value
of our investment in BlackRock at December 31, 2007 was
approximately $9.4 billion. Our BlackRock business segment
information for 2005 and the first nine months of 2006
included in this Note 26 was not restated.
We have allocated the allowances for loan and lease losses
and unfunded loan commitments and letters of credit based on
our assessment of risk inherent in the loan portfolios. Our
allocation of the costs incurred by operations and other
support areas not directly aligned with the businesses is
primarily based on the use of services.
Total business segment financial results differ from total
consolidated results. The impact of these differences is
reflected in the “Intercompany Eliminations” and “Other”
categories. “Intercompany Eliminations” reflects activities
conducted among our businesses that are eliminated in the
consolidated results. “Other” includes residual activities that
do not meet the criteria for disclosure as a separate reportable
business, such as gains or losses related to BlackRock
transactions including LTIP share distributions and
obligations, acquisition integration costs, asset and liability
management activities, related net securities gains or losses,
certain trading activities and equity management activities,
and minority interest in income of BlackRock for 2005 and
first nine months of 2006, differences between business
segment performance reporting and financial statement
reporting (GAAP), and most corporate overhead.
Assets, revenue and earnings attributable to foreign activities
were not material in the periods presented for comparative
purposes.
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