eTrade 2000 Annual Report Download - page 65

The impact inflation has on the Bank is different from the impact on an industrial company because substantially all of our assets and
liabilities are monetary in nature, and interest rates and inflation rates do not always move in concert. Our management believes that
the impact of inflation on financial results depends upon our ability to manage interest rate sensitivity and, by such management,
reduce the inflationary impact upon performance. The most direct impact of an extended period of inflation would be to increase
interest rates and to place upward pressure on our operating expenses. The actual effect of inflation on our net interest income,
however, would depend on the extent to which we were able to maintain a spread between the average yield on our interest-earning
assets and the average cost of our interest-bearing liabilities, which would depend to a significant extent on our asset-liability
sensitivity. As discussed above, we seek to manage the relationship between interest-sensitive assets and liabilities to protect against
wide interest rate fluctuations, including those resulting from inflation. The effect of inflation on our results of operations for the past
three years has been minimal.
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ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Pag
e
Independent Auditors’ Report 71
Report of Independent Public Accountants 72
Consolidated Balance Sheets as of September 30, 2000 and 1999 73
Consolidated Statements of Operations for the Years Ended September 30, 2000, 1999 and 1998 74
Consolidated Statements of Shareowners’ Equity for the Years Ended September 30, 2000, 1999 and 1998 75
Consolidated Statements of Cash Flows for the Years Ended September 30, 2000, 1999 and 1998 77
Notes to Consolidated Financial Statements 78
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INDEPENDENT AUDITORS’ REPORT
To the Board of Directors and Shareowners of
E*TRADE Group, Inc.:
We have audited the consolidated balance sheets of E*TRADE Group, Inc. and subsidiaries (the “Company”) as of September 30,
2000 and 1999, and the related consolidated statements of operations, shareowners’ equity, and cash flows for each of the three years
in the period ended September 30, 2000. These consolidated financial statements are the responsibility of the Company’ s management.
Our responsibility is to express an opinion on the consolidated financial statements based on our audits. The consolidated financial
statements give retroactive effect to the acquisition of E*TRADE Financial Corporation (“ETFC”, formerly Telebanc Financial
Corporation) on January 12, 2000, which has been accounted for as a pooling of interests as described in Note 3 to the consolidated
financial statements. We did not audit the balance sheets of ETFC as of September 30, 2000 and 1999, or the related statements of
operations, shareowners’ equity and cash flows of ETFC for the years ended September 30, 2000 and 1999 and the twelve months
ended December 31, 1998, which statements reflect total assets of $9,027,185,000 and $3,981,244,000 as of September 30, 2000 and
1999, respectively, and net revenues of $140,489,000, $55,387,000 and $25,933,000 for the years ended September 30, 2000 and
1999 and the twelve months ended December 31, 1998, respectively. Those statements were audited by other auditors whose report
(which expresses an unqualified opinion and includes an explanatory paragraph concerning a change in ETFC’ s method of accounting
for start up activities in 1999) has been furnished to us, and our opinion, insofar as it relates to the amounts included for ETFC is based
solely on the report of such other auditors.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits and the report
of the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of E*TRADE Group, Inc. and subsidiaries at September 30, 2000 and 1999, and
the results of their operations and their cash flows for each of the three years in the period ended September 30, 2000 in conformity
with accounting principles generally accepted in the United States of America.
2002. EDGAR Online, Inc.