PNC Bank 2014 Annual Report Download - page 130

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, as well as other products and services in
PNC’s primary geographic markets located in Pennsylvania,
Ohio, New Jersey, Michigan, Illinois, Maryland, Indiana,
North Carolina, Florida, Kentucky, Washington, D.C.,
Delaware, Virginia, Alabama, Missouri, Georgia, Wisconsin
and South Carolina. PNC also provides certain products and
services internationally.
N OTE 1A CCOUNTING P OLICIES
Basis Of Financial Statement Presentation
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 2014
presentation, which did not have a material impact on our
consolidated financial condition or results of operations.
Additionally, we evaluate the materiality of identified errors in
the financial statements using both an income statement and a
balance sheet approach, based on relevant quantitative and
qualitative factors. The consolidated financial statements
include certain adjustments to correct immaterial errors
related to previously reported periods. The current year
financial statements reflect a second quarter 2014 correction
to reclassify certain commercial facility fees from net interest
income to noninterest income. The impact of this
reclassification to prior periods was not significant, and as
such, prior periods were not adjusted. In addition, as disclosed
in certain Notes to the Consolidated Financial Statements, we
made adjustments to previously reported periods for
immaterial errors. Prior period financial statements also reflect
the retrospective application of Accounting Standards Update
(ASU) 2014-01, Investments – Equity Method and Joint
Ventures (Topic 323): Accounting for Investments in Qualified
Affordable Housing Projects.
We have also considered the impact of subsequent events on
these consolidated financial statements.
Use Of Estimates
We prepared these consolidated financial statements using
financial information available at the time of preparation,
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.
Investment In BlackRock, Inc.
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 hold shares of Series C Preferred Stock of BlackRock
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. Our obligation to transfer these shares to
BlackRock is classified as a derivative not designated as a
hedging instrument under GAAP as disclosed in Note 15
Financial Derivatives.
Business Combinations
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.
Special Purpose Entities
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.
112 The PNC Financial Services Group, Inc. – Form 10-K