PNC Bank 2010 Annual Report Download - page 110
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Please find page 110 of the 2010 PNC Bank annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.A variable interest entity (VIE) is a corporation, partnership,
limited liability company, or any other legal structure used to
conduct activities or hold assets that either:
• Does not have equity investors with voting rights that
can directly or indirectly make decisions about the
entity’s activities through those voting rights or
similar rights, or
• Has equity investors that do not provide sufficient
equity for the entity to finance its activities without
additional subordinated financial support.
A VIE often holds financial assets, including loans or
receivables, real estate or other property.
We consolidate a VIE if we are its primary beneficiary. The
primary beneficiary absorbs the majority of the expected
losses from the VIE’s activities, is entitled to receive a
majority of the entity’s residual returns, or both. Upon
consolidation of a VIE, we recognize all of the VIE’s assets,
liabilities and noncontrolling interests on our Consolidated
Balance Sheet. See Note 3 Loan Sale and Servicing Activities
and Variable Interest Entities for information about VIEs that
we do not consolidate but in which we hold a significant
variable interest.
On January 1, 2010, we adopted Accounting Standard Update
(ASU) 2009-17 – Consolidations (Topic 810) – Improvements
to Financial Reporting by Enterprises Involved with Variable
Interest Entities. This guidance amends current GAAP to
require that an enterprise perform a qualitative analysis as
opposed to a quantitative analysis to determine if it is the
primary beneficiary of a VIE. The qualitative analysis
considers the purpose and the design of the VIE as well as the
risks that the VIE was designed to either create or pass
through to variable interest holders. See Recent Accounting
Pronouncements in this Note 1 for further details.
R
EVENUE
R
ECOGNITION
We earn interest and noninterest income from various sources,
including:
• Lending,
• Securities portfolio,
• Asset management,
• Customer deposits,
• Loan sales and servicing,
• Brokerage services, and
• Securities and derivatives trading activities, including
foreign exchange.
We also earn revenue from selling loans and securities, and
we recognize income or loss from certain private equity
activities.
We earn fees and commissions from:
• Issuing loan commitments, standby letters of credit
and financial guarantees,
• Selling various insurance products,
• Providing treasury management services,
• Providing merger and acquisition advisory and
related services, and
• Participating in certain capital markets transactions.
Revenue earned on interest-earning assets including unearned
income and the accretion of discounts recognized on acquired
or purchased loans is recognized based on the constant
effective yield of the financial instrument.
Asset management fees are generally based on a percentage of
the fair value of the assets under management. This caption
also includes any performance fees which are generally based
on a percentage of the returns on such assets and are recorded
as earned. The caption Asset Management also includes our
share of the earnings of BlackRock recognized under the
equity method of accounting.
Service charges on deposit accounts are recognized when
earned. Brokerage fees and gains and losses on the sale of
securities and certain derivatives are recognized on a trade-
date basis.
We record private equity income or loss based on changes in
the valuation of the underlying investments or when we
dispose of our interest.
We recognize gain/(loss) on changes in the fair value of
certain financial instruments where we have elected the fair
value option. These financial instruments include certain
commercial and residential mortgage loans originated for sale,
certain residential mortgage portfolio loans, structured resale
agreements and our investment in BlackRock Series C
preferred stock. We also recognize gain/(loss) on changes in
the fair value of residential mortgage servicing rights, which
are measured at fair value.
We recognize revenue from servicing residential mortgages,
commercial mortgages and other consumer loans as earned
based on the specific contractual terms. We recognize revenue
from securities, derivatives and foreign exchange trading as
well as securities underwriting activities as these transactions
occur or as services are provided. We recognize gains from
the sale of loans upon receipt of cash.
When appropriate, revenue is reported net of associated
expenses in accordance with GAAP.
C
ASH AND
C
ASH
E
QUIVALENTS
Cash and due from banks are considered “cash and cash
equivalents” for financial reporting purposes.
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