Wells Fargo 2006 Annual Report Download - page 121

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119119
(in millions) December 31,
2006 2005
Carrying Estimated Carrying Estimated
amount fair value amount fair value
FINANCIAL ASSETS
Mortgages held for sale $ 33,097 $ 33,240 $ 40,534 $ 40,666
Loans held for sale 721 731 612 629
Loans, net 315,352 315,484 306,966 307,721
Nonmarketable equity investments (cost method) 4,451 4,711 4,377 4,821
FINANCIAL LIABILITIES
Deposits $310,243 $310,116 $314,450 $314,301
Long-term debt
(1)
87,133 86,837 79,654 78,868
(1) The carrying amount and fair value exclude obligations under capital leases of $12 million and $14 million at December 31, 2006 and 2005, respectively.
Financial Liabilities
DEPOSIT LIABILITIES
FAS 107 states that the fair value of deposits with no stated
maturity, such as noninterest-bearing demand deposits,
interest-bearing checking, and market rate and other savings,
is equal to the amount payable on demand at the measurement
date. The amount included for these deposits in the following
table is their carrying value at December 31, 2006 and 2005.
The fair value of other time deposits is calculated based on
the discounted value of contractual cash flows. The discount
rate is estimated using the rates currently offered for like
wholesale deposits with similar remaining maturities.
SHORT-TERM FINANCIAL LIABILITIES
Short-term financial liabilities include federal funds purchased
and securities sold under repurchase agreements, commercial
paper and other short-term borrowings. The carrying amount
is a reasonable estimate of fair value because of the relatively
short time between the origination of the instrument and
its expected realization.
LONG-TERM DEBT
The discounted cash flow method is used to estimate the fair
value of our fixed-rate long-term debt. Contractual cash flows
are discounted using rates currently offered for new notes
with similar remaining maturities.
Derivatives
The fair values of derivatives are reported in Note 26.
Limitations
We make these fair value disclosures to comply with
the requirements of FAS 107. The calculations represent
management’s best estimates; however, due to the lack of
broad markets and the significant items excluded from this
disclosure, the calculations do not represent the underlying
value of the Company. The information presented is
based on fair value calculations and market quotes as of
December 31, 2006 and 2005. These amounts have not
been updated since year end; therefore, the valuations may
have changed significantly since that point in time.
As discussed above, some of our asset and liability financial
instruments are short term, and therefore, the carrying
amounts in the balance sheet approximate fair value. Other
significant assets and liabilities that are not considered financial
assets or liabilities, and for which fair values have not been
estimated, include mortgage servicing rights, premises and
equipment, goodwill and other intangibles, deferred taxes
and other liabilities.
The table below is a summary of financial instruments,
as defined by FAS 107, excluding short-term financial assets
and liabilities, for which carrying amounts approximate fair
value, and trading assets, securities available for sale and
derivatives, which are carried at fair value.