PNC Bank 2008 Annual Report Download - page 99

made only when such adjustments will dilute earnings per
common share.
S TOCK -B ASED C OMPENSATION
In December 2004, the FASB issued SFAS 123R “Share-
Based Payment,” which requires compensation cost related to
share-based payments to employees to be recognized in the
financial statements based on their fair value. We adopted
SFAS 123R effective January 1, 2006, using the modified
prospective method of transition, which required the
provisions of SFAS 123R be applied to new awards and
awards modified, repurchased or cancelled after the effective
date. It also required changes in the timing of expense
recognition for awards granted to retirement-eligible
employees and clarified the accounting for the tax effects of
stock awards. The adoption of SFAS 123R did not have a
significant impact on our consolidated financial statements.
See Note 16 Stock-Based Compensation Plans for additional
information.
R ECENT A CCOUNTING P RONOUNCEMENTS
We adopted the guidance in Staff Accounting Bulletin No.
(“SAB”) 109 on January 1, 2008. SAB 109 provides the SEC
staff’s view that the expected future cash flows related to
servicing should be included in the fair value measurement of
all written loan commitments that are accounted for at fair
value through earnings. The impact of this guidance on our
consolidated financial statements has not been significant.
We adopted SFAS 157, “Fair Value Measurements” on
January 1, 2008. SFAS 157 defines fair value, establishes a
framework for measuring fair value, and expands disclosures
about fair value measurements. The FASB’s Financial Staff
Position “FSP” FAS 157-2, “Effective Date of FASB
Statement No. 157”, defers until January 1, 2009, the
application of SFAS 157 to nonfinancial assets and
nonfinancial liabilities not recognized or disclosed at least
annually at fair value. This includes nonfinancial assets and
nonfinancial liabilities initially measured at fair value in a
business combination or other new basis event, but not
measured at fair value in subsequent periods. See Note 8 Fair
Value for additional information.
As noted above, we adopted SFAS 159 on January 1, 2008.
SFAS 159 permits entities to choose to measure many
financial instruments and certain other assets and liabilities at
fair value. We elected to fair value certain commercial
mortgage loans classified as held for sale and certain other
financial instruments. We also elected fair value for residential
real estate loans held for sale or securitization acquired from
National City. See Note 8 Fair Value for additional
information.
As required, we adopted the provisions of Emerging Issues
Task Force Issue No. (“EITF”) 06-4, “Accounting for
Deferred Compensation and Postretirement Benefit Aspects of
Endorsement Split-Dollar Life Insurance Arrangements,” on
January 1, 2008. EITF 06-4 requires the recognition of a
liability and related compensation costs for endorsement split-
dollar life insurance arrangements that provide a benefit to
retired employees. The adoption of the guidance resulted in a
reduction of retained earnings at January 1, 2008 of
approximately $12 million and did not have a material effect
on our future results of operations or financial position.
In February 2008, the FASB issued FSP FAS 140-3,
“Accounting for Transfers of Financial Assets and Repurchase
Financing Transactions.” This FSP provides guidance on how
the transferor and transferee should separately account for a
transfer of a financial asset and a related repurchase financing
if certain criteria are met. This guidance will be effective
January 1, 2009 for PNC and will impact our accounting for
structured repurchase agreements entered into after that date.
In March 2008, the FASB issued SFAS 161, “Disclosures
about Derivative Instruments and Hedging Activities.” This
standard will require revisions to our derivative disclosures to
provide greater transparency as to the use of derivative
instruments and hedging activities. This guidance will be
effective for interim and annual financial statements beginning
with the first quarter 2009 Form 10-Q.
In April 2008, the FASB issued FSP FAS 142-3,
“Determination of the Useful Life of Intangible Assets.” This
FSP provides guidance as to factors considered in developing
renewal or extension assumptions used to determine the useful
life of a recognized intangible asset under SFAS 142,
“Goodwill and Other Intangible Assets.” This guidance will
be effective January 1, 2009 for PNC. The adoption is not
expected to have a material effect on our results of operations
or financial position.
In May 2008, the FASB issued SFAS 162, “The Hierarchy of
Generally Accepted Accounting Principles.” This standard
formalizes minor changes in prioritizing accounting principles
used in the preparation of financial statements that are
presented in conformity with GAAP.
In May 2008, the FASB issued SFAS 163, “Accounting for
Financial Guarantee Insurance Contracts – an Interpretation of
FASB Statement No. 60.” This standard changes the current
practice of accounting for financial guarantee insurance
contracts by insurance companies including the recognition
and measurement of premium revenue, claim liabilities and
enhances related disclosure requirements. This guidance will
be effective for interim and annual financial statements
beginning in 2009. The adoption of this guidance is not
expected to have a material effect on our results of operations
or financial position.
In May 2008, the FASB issued FSP APB 14-1, “Accounting
for Convertible Debt Instruments That May Be Settled in Cash
Upon Conversion (Including Partial Cash Settlement).” This
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