SunTrust 2011 Annual Report Download - page 89
Download and view the complete annual report
Please find page 89 of the 2011 SunTrust annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.73
The value of the implied goodwill is highly sensitive to the estimated fair value of the reporting unit's net assets. The fair value
of the reporting unit's net assets is estimated using a variety of valuation techniques including the following:
• recent data observed in the market, including similar assets,
• cash flow modeling based on projected cash flows and market discount rates,
• market indices,
• estimated net realizable value of the underlying collateral, and
• price indications from independent third parties.
Observable market information is utilized to the extent available and relevant. The estimated fair values reflect management's
assumptions regarding how a market participant would value the net assets and includes appropriate credit, liquidity, and market
risk premiums that are indicative of the current environment.
If the implied fair value of the goodwill for the reporting unit exceeds the carrying value of the goodwill for the respective reporting
unit, goodwill is not impaired. If the carrying amount of a reporting unit's goodwill exceeds the implied goodwill, an impairment
loss is recognized in an amount equal to the excess. Changes in the estimated fair value of the individual assets and liabilities may
result in a different amount of implied goodwill, and ultimately, the amount of goodwill impairment, if any. Sensitivity analysis
is performed to assess the potential ranges of implied goodwill.
Income Taxes
We are subject to the income tax laws of the U.S., its states and municipalities where we conduct business. We estimate income
tax expense based on amounts expected to be owed to these various tax jurisdictions. The estimated income tax expense or benefit
is reported in the Consolidated Statements of Income/(Loss).
Accrued taxes represent the net estimated amount due to or to be received from tax jurisdictions either currently or in the future
and are reported in other liabilities on the Consolidated Balance Sheet. In estimating accrued taxes, we assess the appropriate tax
treatment of transactions and filing positions after considering statutes, regulations, judicial precedent, and other pertinent
information. The income tax laws are complex and subject to different interpretations by the taxpayer and the relevant government
taxing authorities. Significant judgment is required in determining the tax accruals and in evaluating our tax positions, including
evaluating uncertain tax positions. Changes in the estimate of accrued taxes occur periodically due to changes in tax rates,
interpretations of tax laws, the status of examinations by the tax authorities, and newly enacted statutory, judicial and regulatory
guidance that could impact the relative merits and risks of tax positions. These changes, when they occur, impact tax expense and
can materially affect our operating results. We review our tax positions quarterly and make adjustments to accrued taxes as new
information becomes available.
Deferred income tax assets represent amounts available to reduce income taxes payable in future years. Such assets arise due to
temporary differences between the financial reporting and the tax bases of assets and liabilities, as well as from NOL and tax credit
carryforwards. We regularly evaluate the realizability of DTAs. A valuation allowance is recognized for a DTA if, based on the
weight of available evidence, it is more likely than not that some portion or all of the DTA will not be realized. In determining
whether a valuation allowance is necessary, we consider the level of taxable income in prior years to the extent that carrybacks
are permitted under current tax laws, as well as estimates of future pre-tax and taxable income and tax planning strategies that
would, if necessary, be implemented. We currently maintain a valuation allowance associated with DTAs for certain state
carryforwards. We expect to realize our remaining DTAs over the allowable carryback and/or carryforward periods. Therefore,
no valuation allowance is deemed necessary against our federal or remaining state DTAs as of December 31, 2011. For additional
information, refer to Note 15, “Income Taxes,” to the Consolidated Financial Statements in this Form 10-K.
Pension Accounting
Several variables affect the annual cost for our retirement programs. The main variables are: (1) size and characteristics of the
employee population, (2) discount rate, (3) expected long-term rate of return on plan assets, (4) recognition of actual asset returns,
(5) other actuarial assumptions and (6) healthcare cost. Below is a brief description of each variable and the effect it has on our
pension costs. See Note 16, “Employee Benefit Plans,” to the Consolidated Financial Statements in this Form 10-K for additional
information.
Size and Characteristics of the Employee Population
Pension cost is directly related to the number of employees covered by the plans, and other factors including salary, age, years of
employment, and benefit terms. On November 14, 2011, we announced the curtailment of all pension benefit accruals as of
December 31, 2011. The pension curtailment led to a remeasurement of pension obligations as of November 14, 2011 and adjustment
of pension costs accrued after that date. Prior to the pension curtailment, most employees who had 20 or more years of service as