US Bank 2015 Annual Report Download - page 129

Deferred income tax assets and liabilities reflect the tax
effect of estimated temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for the same items for
income tax reporting purposes.
The significant components of the Company’s net deferred tax asset (liability) follows:
At December 31 (Dollars in Millions) 2015 2014
Deferred Tax Assets
Allowance for credit losses ............................................................................. $1,615 $ 1,652
Accrued expenses .................................................................................... 764 630
Federal, state and foreign net operating loss carryforwards ................................................... 464 212
Partnerships and other investment assets ................................................................. 380 403
Pension and postretirement benefits ..................................................................... 247 437
Stock compensation .................................................................................. 131 143
Other deferred tax assets, net .......................................................................... 219 208
Gross deferred tax assets ............................................................................ 3,820 3,685
Deferred Tax Liabilities
Leasing activities ..................................................................................... (3,026) (3,042)
Mortgage servicing rights .............................................................................. (859) (871)
Goodwill and other intangible assets ..................................................................... (859) (772)
Loans .............................................................................................. (204) (212)
Fixed assets ......................................................................................... (111) (90)
Securities available-for-sale and financial instruments ........................................................ (47) (165)
Other deferred tax liabilities, net ......................................................................... (55) (159)
Gross deferred tax liabilities .......................................................................... (5,161) (5,311)
Valuation allowance ................................................................................... (137) (101)
Net Deferred Tax Asset (Liability) ..................................................................... $(1,478) $(1,727)
The Company has approximately $1.1 billion of federal, state
and foreign net operating loss carryforwards which expire at
various times through 2035. A substantial portion of these
carryforwards relate to state-only net operating losses. These
carryforwards are subject to a full valuation allowance.
Management has determined it is more likely than not the other
net deferred tax assets could be realized through carry back to
taxableincomeinprioryears,future reversals of existing taxable
temporary differences and future taxable income.
At December 31, 2015, retained earnings included
approximately $102 million of base year reserves of acquired
thrift institutions, for which no deferred federal income tax liability
has been recognized. These base year reserves would be
recaptured if the Company’s banking subsidiaries cease to
qualify as a bank for federal income tax purposes. The base year
reserves also remain subject to income tax penalty provisions
that, in general, require recapture upon certain stock
redemptions of, and excess distributions to, stockholders.
NOTE 20 DERIVATIVE INSTRUMENTS
In the ordinary course of business, the Company enters into
derivative transactions to manage various risks and to
accommodate the business requirements of its customers.
The Company recognizes all derivatives on the Consolidated
Balance Sheet at fair value in other assets or in other liabilities.
On the date the Company enters into a derivative contract,
the derivative is designated as either a fair value hedge, cash
flow hedge, net investment hedge, or a designation is not
made as it is a customer-related transaction, an economic
hedge for asset/liability risk management purposes or another
stand-alone derivative created through the Company’s
operations (“free-standing derivative”). When a derivative is
designated as a fair value, cash flow or net investment hedge,
the Company performs an assessment, at inception and, at a
minimum, quarterly thereafter, to determine the effectiveness
of the derivative in offsetting changes in the value or cash
flows of the hedged item(s).
Fair Value Hedges These derivatives are interest rate swaps
the Company uses to hedge the change in fair value related
to interest rate changes of its underlying fixed-rate debt.
Changes in the fair value of derivatives designated as fair
value hedges, and changes in the fair value of the hedged
items, are recorded in earnings. All fair value hedges were
highly effective for the year ended December 31, 2015, and
the change in fair value attributed to hedge ineffectiveness
was not material.
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