PNC Bank 2015 Annual Report Download - page 128

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 and certain tax credit investments. See
Note 2 Loan Sale and Servicing Activities and Variable
Interest Entities for information about VIEs that we
consolidate as well as those that we do not consolidate but in
which we hold a significant variable interest.
Revenue Recognition
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 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 and commercial mortgage servicing rights (MSRs).
We recognize revenue from servicing residential mortgages,
commercial mortgages and other consumer loans as earned
based on the specific contractual terms. These revenues 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.
Cash And Cash Equivalents
Cash and due from banks are considered “cash and cash
equivalents” for financial reporting purposes.
Investments
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.
Debt Securities
Debt securities are recorded on a trade-date basis. We classify
debt securities as held to maturity and carry them at amortized
cost if we have the positive intent and ability to hold the
securities to maturity. Debt securities that we purchase for
certain risk management activities or customer-related trading
activities are carried at fair value and classified as Trading
securities on our Consolidated Balance Sheet. Realized and
unrealized gains and losses on trading securities are included
in Other noninterest income.
Debt securities not classified as held to maturity or trading are
designated as securities available for sale and carried at fair
value with unrealized gains and losses, net of income taxes,
reflected in Accumulated other comprehensive income (loss).
110 The PNC Financial Services Group, Inc. – Form 10-K