PNC Bank 2010 Annual Report Download - page 109
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OTES
T
O
C
ONSOLIDATED
F
INANCIAL
S
TATEMENTS
T
HE
PNC F
INANCIAL
S
ERVICES
G
ROUP
,I
NC
.
B
USINESS
PNC is one of the largest diversified financial services
companies in the United States and is headquartered in
Pittsburgh, Pennsylvania.
PNC has businesses engaged in retail banking, corporate and
institutional banking, asset management, and residential
mortgage banking, providing many of its products and
services nationally and others in PNC’s primary geographic
markets located in Pennsylvania, Ohio, New Jersey, Michigan,
Maryland, Illinois, Indiana, Kentucky, Florida, Virginia,
Missouri, Delaware, Washington, D.C., and Wisconsin. PNC
also provides certain products and services internationally.
N
OTE
1A
CCOUNTING
P
OLICIES
B
ASIS
O
F
F
INANCIAL
S
TATEMENT
P
RESENTATION
Our consolidated financial statements include the accounts of
the parent company and its subsidiaries, most of which are
wholly owned, and certain partnership interests and variable
interest entities.
We prepared these consolidated financial statements in
accordance with accounting principles generally accepted in
the United States of America (GAAP). We have eliminated
intercompany accounts and transactions. We have also
reclassified certain prior year amounts to conform with the
2010 presentation. These reclassifications did not have a
material impact on our consolidated financial condition or
results of operations.
See Note 2 Divestiture regarding our July 1, 2010 sale of PNC
Global Investment Servicing Inc. The Consolidated Income
Statement for all periods presented and related Notes To
Consolidated Financial Statements reflect the global
investment servicing business as discontinued operations.
We have considered the impact on these consolidated
financial statements of subsequent events.
U
SE
O
F
E
STIMATES
We prepared these consolidated financial statements using
financial information available at the time, which requires us
to make estimates and assumptions that affect the amounts
reported. Our most significant estimates pertain to our fair
value measurements, allowances for loan and lease losses and
unfunded loan commitments and letters of credit, purchased
impaired loans, revenue recognition and residential mortgage
servicing rights. Actual results may differ from the estimates
and the differences may be material to the consolidated
financial statements.
I
NVESTMENT IN
B
LACK
R
OCK
,I
NC
.
We account for our investment in the common stock and
Series B Preferred Stock of BlackRock (deemed to be
in-substance common stock) under the equity method of
accounting. On January 31, 2010, the Series D Preferred Stock
was converted to Series B Preferred Stock. The investment in
BlackRock is reflected on our Consolidated Balance Sheet in
Equity investments, while our equity in earnings of
BlackRock is reported on our Consolidated Income Statement
in Asset management revenue.
On February 27, 2009, PNC’s obligation to deliver BlackRock
common shares in connection with BlackRock’s long-term
incentive plan programs was replaced with an obligation to
deliver shares of BlackRock’s new Series C Preferred Stock.
The 2.9 million shares of Series C Preferred Stock were
acquired from BlackRock in exchange for common shares on
that same date. Since these preferred shares were not deemed
to be in substance common stock, we elected to account for
these preferred shares at fair value and the changes in fair
value will offset the impact of marking-to-market the
obligation to deliver these shares to BlackRock. Our
investment in the BlackRock Series C Preferred Stock is
included on our Consolidated Balance Sheet in Other assets.
As noted above, we mark-to-market our obligation to transfer
BlackRock shares related to certain BlackRock long-term
incentive plan (LTIP) programs. This obligation is classified
as a derivative not designated as a hedging instrument under
GAAP as disclosed in Note 16 Financial Derivatives.
B
USINESS
C
OMBINATIONS
We record the net assets of companies that we acquire at their
estimated fair value at the date of acquisition and we include
the results of operations of the acquired companies on our
Consolidated Income Statement from the date of acquisition.
We recognize, as goodwill, the excess of the acquisition price
over the estimated fair value of the net assets acquired.
S
PECIAL
P
URPOSE
E
NTITIES
Special purpose entities (SPEs) are defined as legal entities
structured for a particular purpose. We use special purpose
entities in various legal forms to conduct normal business
activities. We review the structure and activities of special
purpose entities for possible consolidation under the
applicable GAAP guidance.
101