PNC Bank 2010 Annual Report Download - page 119
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Please find page 119 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.realization of deferred tax assets requires an assessment to
determine the realization of such assets. Realization refers to
the incremental benefit achieved through the reduction in
future taxes payable or refunds receivable from the deferred
tax assets, assuming that the underlying deductible differences
and carryforwards are the last items to enter into the
determination of future taxable income. We establish a
valuation allowance for tax assets when it is more likely than
not that they will not be realized, based upon all available
positive and negative evidence.
E
ARNINGS
P
ER
C
OMMON
S
HARE
Basic earnings per common share is calculated using the
two-class method to determine income attributable to common
shareholders. Unvested share-based payment awards that
contain nonforfeitable rights to dividends or dividend
equivalents are considered participating securities under the
two-class method. Income attributable to common
shareholders is then divided by the weighted-average common
shares outstanding for the period.
Diluted earnings per common share is calculated under the
more dilutive of either the treasury method or the two-class
method. For the diluted calculation, we increase the weighted-
average number of shares of common stock outstanding by the
assumed conversion of outstanding convertible preferred stock
and debentures from the beginning of the year or date of
issuance, if later, and the number of shares of common stock
that would be issued assuming the exercise of stock options
and warrants and the issuance of incentive shares using the
treasury stock method. These adjustments to the weighted-
average number of shares of common stock outstanding are
made only when such adjustments will dilute earnings per
common share. See Note 17 Earnings Per Share for additional
information.
R
ECENT
A
CCOUNTING
P
RONOUNCEMENTS
On January 1, 2010, we adopted ASU 2009-16 – Transfers
and Servicing (Topic 860) – Accounting For Transfers of
Financial Assets which is a codification of guidance issued in
June 2009. This guidance removes the concept of a qualifying
special-purpose entity. The guidance also establishes
conditions for accounting and reporting of a transfer of a
portion of a financial asset, modifies the asset sale/
derecognition criteria, and changes how retained interests are
initially measured.
On January 1, 2010, we adopted ASU 2009-17 –
Consolidations (Topic 810) – Improvements to Financial
Reporting by Enterprises Involved with Variable Interest
Entities. This guidance removes the scope exception for
qualifying special-purpose entities, contains new criteria for
determining the primary beneficiary of a variable interest
entity (VIE) and increases the frequency of required
reassessments to determine whether an entity is the primary
beneficiary of a VIE. This guidance also 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. VIEs are assessed for
consolidation under Topic 810 when we hold variable interests
in these entities. A VIE is a corporation, partnership, limited
liability company, or any other legal structure used to conduct
activities or hold assets that either: (1) Does not have either
investors that have sufficient equity at risk for the legal entity
to finance its activities without additional subordinated
finance support, or (2) As a group, the holders of the equity
investment at risk lack any one of the following three
characteristics: a.) The power, through voting rights or similar
rights, to direct the activities of a legal entity that most
significantly impact the entity’s economic performance, b.)
The obligation to absorb the expected losses of the legal
entity, or c.) The right to receive the expected residual returns
of the legal entity. A VIE often holds financial assets,
including loans or receivables, real estate or other property.
PNC consolidates VIEs when we are deemed to be the
primary beneficiary. The primary beneficiary of a VIE is
determined to be the party that meets both of the following
criteria: (1) has the power to make decisions that most
significantly affect the economic performance of the VIE and
(2) has the obligation to absorb losses or the right to receive
benefits that in either case could potentially be significant to
the VIE. Effective January 1, 2010, we consolidated Market
Street Funding LLC (Market Street), a credit card
securitization trust, and certain Low Income Housing Tax
Credit (LIHTC) investments. We recorded consolidated assets
of $4.2 billion, consolidated liabilities of $4.2 billion, and an
after-tax cumulative effect adjustment to retained earnings of
$92 million upon adoption (see Note 3 Loan Sale and
Servicing Activities and Variable Interest Entities).
In January 2010, the FASB issued ASU 2010-6, Fair Value
Measurements and Disclosures (Topic 820), Improving
Disclosures About Fair Value Measurements. This guidance
requires new disclosures as follows: (1) transfers in and out of
Levels 1 and 2 and the reasons for the transfers, (2) additional
breakout of asset and liability categories and (3) purchases,
sales, issuances and settlements to be reported separately in
the Level 3 rollforward. This guidance was effective for PNC
for first quarter 2010 reporting with the exception of item 3
which is effective beginning with first quarter 2011 reporting.
In April 2010, the FASB issued ASU 2010-18, Receivables
(Sub Topic 310-30), Effect of a Loan Modification When the
Loan Is Part of a Pool That Is Accounted for as a Single Asset.
This ASU amends the accounting guidance related to loans
that are accounted for within a pool under ASC 310-30. The
new guidance clarifies that modifications of such loans do not
result in the removal of those loans from the pool even if the
modification of those loans would otherwise be considered a
troubled debt restructuring. The amended guidance continues
to require that an entity consider whether the pool of assets in
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