US Bank 2015 Annual Report Download - page 98

expected returns and actual performance of plan assets. The
unrealized difference between actual experience and
expected returns is included in expense over a period of
approximately twelve years. The overfunded or underfunded
status of the plans is recorded as an asset or liability on the
Consolidated Balance Sheet, with changes in that status
recognized through other comprehensive income (loss).
Premises and Equipment Premises and equipment are
stated at cost less accumulated depreciation and depreciated
primarily on a straight-line basis over the estimated life of the
assets. Estimated useful lives range up to 40 years for newly
constructed buildings and from 3 to 20 years for furniture and
equipment.
Capitalized leases, less accumulated amortization, are
included in premises and equipment. Capitalized lease
obligations are included in long-term debt. Capitalized leases
are amortized on a straight-line basis over the lease term and
the amortization is included in depreciation expense.
Stock-Based Compensation The Company grants stock-
based awards, including restricted stock, restricted stock units
and options to purchase common stock of the Company.
Stock option grants are for a fixed number of shares to
employees and directors with an exercise price equal to the
fair value of the shares at the date of grant. Restricted stock
and restricted stock unit grants are awarded at no cost to the
recipient. Stock-based compensation for awards is recognized
in the Company’s results of operations on a straight-line basis
over the vesting period. The Company immediately recognizes
compensation cost of awards to employees that meet
retirement status, despite their continued active employment.
The amortization of stock-based compensation reflects
estimated forfeitures adjusted for actual forfeiture experience.
As compensation expense is recognized, a deferred tax asset
is recorded that represents an estimate of the future tax
deduction from exercise or release of restrictions. At the time
stock-based awards are exercised, cancelled, expire, or
restrictions are released, the Company may be required to
recognize an adjustment to tax expense, depending on the
market price of the Company’s common stock at that time.
Per Share Calculations Earnings per common share is
calculated by dividing net income applicable to U.S. Bancorp
common shareholders by the weighted average number of
common shares outstanding. Diluted earnings per common
share is calculated by adjusting income and outstanding shares,
assuming conversion of all potentially dilutive securities.
NOTE 2 ACCOUNTING CHANGES
Revenue Recognition In May 2014, the Financial
Accounting Standards Board (“FASB”) issued accounting
guidance, originally effective for the Company on January 1,
2017, related to revenue recognition from contracts with
customers. In August 2015, the FASB delayed the effective
date of this guidance by one year, resulting in it becoming
effective for the Company on January 1, 2018.
This guidance amends certain currently existing revenue
recognition accounting guidance and allows for either
retrospective application to all periods presented or a
modified retrospective approach where the guidance would
only be applied to existing contracts in effect at the adoption
date and new contracts going forward. The Company is
currently evaluating the impact of this guidance under the
modified retrospective approach and expects the adoption
will not be material to its financial statements.
Consolidation In February 2015, the FASB issued
accounting guidance, effective for the Company on
January 1, 2016, related to the analysis required by
organizations to evaluate whether they should consolidate
certain legal entities. The Company expects the adoption of
this guidance will not be material to its financial statements.
NOTE 3 BUSINESS COMBINATIONS
In June 2014, the Company acquired the Chicago-area
branch banking operations of the Charter One Bank franchise
(“Charter One”) owned by RBS Citizens Financial Group. The
acquisition included Charter One’s retail branch network,
small business operations and select middle market
relationships. The Company acquired approximately
$969 million of loans and $4.8 billion of deposits with this
transaction.
NOTE 4 RESTRICTIONS ON CASH AND DUE FROM BANKS
Banking regulators require bank subsidiaries to maintain
minimum average reserve balances, either in the form of cash
or reserve balances held with central banks or other financial
institutions. The amount of required reserve balances were
approximately $2.2 billion and $2.0 billion at December 31,
2015 and 2014, respectively, and primarily represent those
required to be held at the Federal Reserve Bank. At
December 31, 2015 and 2014, the Company held $3.3 billion
and $4.4 billion, respectively, of balances at the Federal
Reserve Bank and other financial institutions to meet these
requirements. These balances are included in cash and due
from banks on the Consolidated Balance Sheet.
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