US Bank 2014 Annual Report Download - page 78

acquisitions of similar businesses. Valuation multiples may
be based on revenue, price-to-earnings and tangible capital
ratios of comparable public companies and business
segments. These multiples may be adjusted to consider
competitive differences, including size, operating leverage
and other factors. The carrying amount of a reporting unit is
determined based on the amount of equity required for the
reporting unit’s activities, considering the specific assets and
liabilities of the reporting unit. The Company determines the
amount of equity for each reporting unit on a risk-adjusted
basis considering economic and regulatory capital
requirements, and includes deductions and limitations
related to certain types of assets including MSRs, purchased
credit card relationship intangibles, and capital markets
activity in the Company’s Wholesale Banking and
Commercial Real Estate segment. The Company does not
assign corporate assets and liabilities to reporting units that
do not relate to the operations of the reporting unit or are not
considered in determining the fair value of the reporting unit.
These assets and liabilities primarily relate to the Company’s
investment securities portfolio and other investments
(including direct equity investments, bank-owned life
insurance and tax-advantaged investments) and corporate
debt and other funding liabilities. In the most recent goodwill
impairment test, the portion of the Company’s total equity
allocated to the Treasury and Corporate Support operating
segment included approximately $3 billion in excess of the
economic and regulatory capital requirements of that
segment.
The Company’s annual assessment of potential goodwill
impairment was completed during the second quarter of
2014. Based on the results of this assessment, no goodwill
impairment was recognized. The Company continues to
monitor goodwill and other intangible assets for impairment
indicators throughout the year.
Income Taxes The Company estimates income tax expense
based on amounts expected to be owed to the various tax
jurisdictions in which it operates, including federal, state and
local domestic jurisdictions, and an insignificant amount to
foreign jurisdictions. The estimated income tax expense is
reported in the Consolidated Statement of Income. Accrued
taxes are reported in other assets or other liabilities on the
Consolidated Balance Sheet and represent the net estimated
amount due to or to be received from taxing jurisdictions
either currently or deferred to future periods. Deferred taxes
arise from differences between assets and liabilities
measured for financial reporting purposes versus income tax
reporting purposes. Deferred tax assets are recognized if, in
management’s judgment, their realizability is determined to
be more likely than not. Uncertain tax positions that meet the
more likely than not recognition threshold are measured to
determine the amount of benefit to recognize. An uncertain
tax position is measured at the largest amount of benefit
management believes is more likely than not to be realized
upon settlement. In estimating accrued taxes, the Company
assesses the relative merits and risks of the appropriate tax
treatment considering statutory, judicial and regulatory
guidance in the context of the tax position. Because of the
complexity of tax laws and regulations, interpretation can be
difficult and subject to legal judgment given specific facts and
circumstances. It is possible that others, given the same
information, may at any point in time reach different
reasonable conclusions regarding the estimated amounts of
accrued taxes.
Changes in the estimate of accrued taxes occur
periodically due to changes in tax rates, interpretations of tax
laws, the status of examinations being conducted by various
taxing authorities, and newly enacted statutory, judicial and
regulatory guidance that impacts the relative merits and
risks of tax positions. These changes, when they occur, affect
accrued taxes and can be significant to the operating results
of the Company. Refer to Note 19 of the Notes to
Consolidated Financial Statements for additional information
regarding income taxes.
CONTROLS AND PROCEDURES
Under the supervision and with the participation of the
Company’s management, including its principal executive
officer and principal financial officer, the Company has
evaluated the effectiveness of the design and operation of its
disclosure controls and procedures (as defined in Rules 13a-
15(e) and 15d-15(e) under the Securities Exchange Act of
1934 (the “Exchange Act”)). Based upon this evaluation, the
principal executive officer and principal financial officer have
concluded that, as of the end of the period covered by this
report, the Company’s disclosure controls and procedures
were effective.
During the most recently completed fiscal quarter,
there was no change made in the Company’s internal
controls over financial reporting (as defined in Rules 13a-
15(f) and 15d-15(f) under the Exchange Act) that has
materially affected, or is reasonably likely to materially
affect, the Company’s internal control over financial
reporting.
The annual report of the Company’s management on
internal control over financial reporting is provided on
page 77. The attestation report of Ernst & Young LLP, the
Company’s independent accountants, regarding the
Company’s internal control over financial reporting is
provided on page 79.
76