SunTrust 2005 Annual Report Download - page 75

SUNTRUST  ANNUAL REPORT 73
ACCOUNTING POLICIES ADOPTED
In December , the American Institute of Certified Public Accountants
(“AICPA”) issued Statement of Position (“SOP”) -, “Accounting for Loans
or Certain Debt Securities Acquired in a Transfer.” This SOP requires acquired
impaired loans for which it is probable that the investor will be unable to
collect all contractually required payments receivable to be recorded at the
present value of amounts expected to be received. The SOP also prohibits
the carrying over or creation of valuation allowances in the initial account-
ing for these loans. The SOP was effective for loans acquired in fiscal years
beginning after December , . The adoption of this SOP did not mate-
rially impact the Company’s financial position or results of operations.
In December , the FASB issued SFAS No.  (Revised), “Share-
Based Payment.” This Statement replaces SFAS No. , “Accounting for
Stock-Based Compensation,” and supersedes Accounting Practice Bulletin
(“APB”) Opinion No. , “Accounting for Stock Issued to Employees”. SFAS
No. (R) clarifies and expands SFAS No. ’s guidance in several areas,
including measuring fair value, classifying an award as equity or as a liability,
accounting for non-substantive vesting provisions, and attributing compen-
sation cost to reporting periods. Under the provisions of SFAS No. (R),
the alternative to use APB Opinion No. ’s intrinsic value method of
accounting that was provided in SFAS No. , as originally issued, is elimi-
nated, and entities are required to measure liabilities incurred to employees
in share-based payment transactions at fair value. Effective January , ,
the Company adopted the fair value recognition provision of SFAS No. ,
prospectively, and began expensing the cost of stock options. The Company
has quantified the effect on net income and earnings per share if the fair
value based method had been applied on a retrospective basis in Note  to
the Consolidated Financial Statements.
In March , the Securities and Exchange Commission (“SEC”)
released Staff Accounting Bulletin No.  (“SAB No. ”), which
addresses the application of SFAS No. (R). The Company adopted
SFAS No. (R) effective January ,  using the modified prospective
application method. The adoption did not have a material impact on the
Company’s financial position or results of operations.
In May , the FASB issued SFAS No. , “Accounting Changes
and Error Corrections — a replacement of APB Opinion No.  and FASB
Statement No. .” SFAS No.  applies to and changes the requirements
for reporting and accounting for a change in accounting principle. This
statement requires retrospective application to prior periods’ financial
statements with changes in accounting principle, unless it is impracticable
to determine either the period-specific effects or the cumulative effect of
the change. The provisions of Opinion No. , “Accounting Changes,” that
relate to reporting the correction of an error in previously issued financial
statements and a change in accounting estimate are carried forward in
SFAS No.  without change. SFAS No.  also carries forward the pro-
visions of SFAS No. , “Reporting Accounting Changes in Interim Financial
Statements an amendment of APB Opinion No. ,” that govern the report-
ing of accounting changes in interim financial statements. SFAS No. 
is effective for accounting changes and corrections of errors made in fiscal
years beginning after December , . The Company adopted the provi-
sions of SFAS No.  on January , . The adoption of this Statement
did not impact the Company’s financial position or results of operations.
RECENTLY ISSUED AND PENDING ACCOUNTING
PRONOUNCEMENTS
In July , the FASB issued a proposed FASB Staff Position (“FSP”) No. -
a, “Accounting for a Change or Projected Change in the Timing of Cash Flows
Relating to Income Taxes Generated by a Leveraged Lease Transaction.” FSP
-a indicates that a change in the timing of the realization of tax bene-
fits on a leveraged lease will require recalculation of that lease. In January
, the FASB reached a tentative decision that an entity would not have
to reclassify a lease from leveraged lease accounting if, as a result of the
most recent recalculation, the lease no longer qualifies as a leveraged lease.
SunTrust is currently in the process of evaluating the impact that this pro-
posed guidance, if finalized, would have on the Company’s financial position
and results of operations. The FASB expects to issue the final FSP in the first
quarter of .
In July , the FASB issued an exposure draft of a Proposed
Interpretation, “Accounting for Uncertain Tax Positions.” This exposure draft
clarifies guidance on the recognition and measurement of uncertain tax
positions and, if issued, may result in companies revising their threshold for
recognizing tax benefits that have some degree of uncertainty. The expo-
sure draft also addresses the accrual of any interest and penalties related to
tax uncertainties. The FASB expects to issue the Final Interpretation, which
would include amendments to SFAS No. , “Accounting for Income
Taxes,” in the first quarter of . SunTrust is currently in the process of
evaluating the impact that this exposure draft, if finalized, would have on
the Company’s financial position or results of operations.
In December , the FASB issued FSP No. SOP --, “Terms of
Loan Products That May Give Rise to a Concentration of Credit Risk.” FSP
No. SOP -- requires additional disclosures for certain loan products
that expose entities to higher risks than traditional loan products. The FSP
requires the Company to disclose additional information such as significant
concentrations of credit risks resulting from these products, quantitative
information about the market risks of financial instruments that is consis-
tent with the way the Company manages or adjusts those risks, concen-
trations in revenue from particular products if certain conditions are met,
and the factors that influenced management’s judgment as it relates to the
accounting policy for credit losses and doubtful accounts. This FSP is effec-
tive for the reporting period ended December , . The required disclo-
sures related to the Company’s loan products that are within the scope of
this FSP are included in Note  to the Consolidated Financial Statements.