PNC Bank 2011 Annual Report Download - page 117

N 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,
Illinois, Maryland, Indiana, Kentucky, Florida, Washington,
D.C., Delaware, Virginia, Missouri, Wisconsin and Georgia.
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 to the 2011
presentation. These reclassifications did not have a material
impact on our consolidated financial condition or results of
operations.
See Note 2 Acquisition and Divestiture Activity 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, and
accretion on purchased impaired loans. Actual results may
differ from the estimates and the differences may be material
to the consolidated financial statements.
I NVESTMENT I N 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. 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.
We also own approximately 1.5 million shares of Series C
Preferred Stock of BlackRock after delivery of approximately
1.3 million shares in September 2011 pursuant to our
obligation to partially fund a portion of certain BlackRock
long-term incentive plan (LTIP) programs. Since these
preferred shares are not deemed to be in substance common
stock, we have 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 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.
108 The PNC Financial Services Group, Inc. – Form 10-K