PNC Bank 2013 Annual Report Download - page 132

VIEs are assessed for consolidation under ASC 810
Consolidations when we hold a variable interest in these
entities. We consolidate a VIE if we are its primary
beneficiary. The primary beneficiary of a VIE is determined to
be the party that meets both of the following criteria: (i) has
the power to make decisions that most significantly affect the
economic performance of the VIE; and (ii) has the obligation
to absorb losses or the right to receive benefits that in either
case could potentially be significant to the VIE. Upon
consolidation of a VIE, we recognize all of the VIE’s assets,
liabilities and noncontrolling interests on our Consolidated
Balance Sheet. On a quarterly basis, we determine whether
any changes occurred requiring a reassessment of whether
PNC is the primary beneficiary of an entity.
In applying this guidance, we consolidate a credit card
securitization trust, a non-agency securitization trust, and
certain tax credit investments and other arrangements. Prior to
the wind down of Market Street Funding LLC (Market Street),
we also consolidated that entity. 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.
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,
• Sale of loans and securities,
• Certain private equity activities, and
• Securities, derivatives and foreign exchange
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 amortization/accretion of premiums or
discounts recognized on acquired loans and debt securities, is
recognized based on the constant effective yield of the
financial instrument or based on other applicable accounting
guidance.
The Consolidated Income Statement caption Asset
management includes asset management fees, which are
generally based on a percentage of the fair value of the assets
under management. Additionally, Asset management
noninterest income includes performance fees, which are
generally based on a percentage of the returns on such assets
and are recorded as earned, as well as 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, 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 (MSRs), 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. These revenues, as
well as changes in fair value and impairment on servicing
rights, are reported on the Consolidated Income Statement in
the line items Residential mortgage, Corporate services and
Consumer services. We recognize revenue from securities,
derivatives and foreign exchange customer-related trading, as
well as securities underwriting activities, as these transactions
occur or as services are provided. We generally recognize
gains from the sale of loans upon receipt of cash. Mortgage
revenue recognized is reported net of mortgage repurchase
reserves.
When appropriate, revenue is reported net of associated
expenses in accordance with GAAP.
C ASH A ND C ASH E QUIVALENTS
Cash and due from banks are considered “cash and cash
equivalents” for financial reporting purposes.
I NVESTMENTS
We hold interests in various types of investments. The
accounting for these investments is dependent on a number of
factors including, but not limited to, items such as:
• Ownership interest,
• Our plans for the investment, and
• The nature of the investment.
114 The PNC Financial Services Group, Inc. – Form 10-K