eTrade 2001 Annual Report Download - page 51

Overview
E*TRADE Group, Inc. (“E*TRADE Group,” the “Company,” or “we”), a financial services holding company, is a provider of
personalized online financial services offering value-added investing, banking, lending, planning and advice to our customers through
services provided by our wholly-owned subsidiaries, including but not limited to, E*TRADE Securities, Incorporated (“E*TRADE
Securities”), a securities broker-dealer, E*TRADE Institutional, a provider of global securities brokerage and other related services to
institutional clients, ETFC, a provider of financial services whose primary business is conducted by its subsidiary, E*TRADE Bank
(the “Bank”), a federally chartered savings bank that provides deposit accounts insured by the Federal Deposit Insurance Corporation
(“FDIC”) to customers nationwide. Our business is discussed in greater detail in this Form 10-K in “Item 1. Business.”
On January 22, 2001, our fiscal year end was changed from September 30 to December 31. During the threemonths ended December
31, 2000 and the fiscal year ended December 31, 2001, we expanded and diversified our business through several strategic
acquisitions. Through our acquisition in February 2001 of
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LoansDirect, Inc., which merged into and was renamed E*TRADE Mortgage Corporation effective June 15, 2001 (“E*TRADE
Mortgage”), we began offering mortgage loans. Through our acquisitions of Web Street, Inc. (“Web Street”) and Dempsey and
Company, LLC (“Dempsey”), we expanded our Domestic Retail Brokerage business by offering market-making services and
increasing our account base. In October 2000, we also enhanced our wealth management business through the acquisition of
PrivateAccounts, renamed E*TRADE Advisory Services, a platform which aggregates the services of individual money managers and
investment advisers and launched Stock Baskets, which enables our customers to set up dollar denominated, personalized portfolios
via the Internet. All of our acquisitions from October 2000 through the end of 2001 have been accounted for under the purchase
method and, accordingly, the operating results of these entities have been combined with those of the Company since the dates of
acquisition.
Summary of Critical Policies and Estimates
Management’ s Discussion and Analysis of Financial Condition and Results of Operations is based on our consolidated financial
statements prepared in conformity with accounting principles generally accepted in the United States of America. Because we operate
in the financial services industry, we follow certain accounting guidance used by the brokerage and banking industries. One of the
more significant impacts of these rules is that interest income and expense from our lending and banking activities, as well as gains and
losses from sales of loans and bank investments, are included in net revenues, whereas corporate interest income and expense, as well
as gains and losses on corporate investments, are reported as non-operating income or expense. In addition, our consolidated balance
sheet is not separated into current and noncurrent assets and liabilities. Also, certain financial assets, such as mortgage-backed and
investment securities are carried at fair market value in our consolidated balance sheet, while other assets, such as loans receivable, are
carried at historic values.
Note 2 to the Consolidated Financial Statements contains a summary of the significant accounting policies that we use. Many of these
accounting policies require the use of estimates. The preparation of these statements requires us to make estimates and assumptions
that affect the amounts reported in the consolidated financial statements and related notes for the periods presented and actual results
could differ from our estimates. Critical accounting estimates, which are both important to the portrayal of our financial condition and
which require complex, subjective judgments, are as follows:
• Accrued restructuring costs;
2002. EDGAR Online, Inc.