eTrade 2002 Annual Report Download - page 109

Table of Contents
Index to Financial Statements
Brokerage Interest Expense —Brokerage interest expense primarily represents interest paid to customers on certain credit balances, interest
paid to banks and interest paid to other broker-dealers through a brokerage subsidiary’ s stock loan program. Interest expense is recognized
when incurred.
Gain on Sales of Originated Loans —Gain from sales of originated loans are recognized at the date of settlement and are based on the
difference between the cash received and the carrying value of the related loans sold less related transaction costs. In cases where the Company
retains the servicing rights associated with loans sold, the gain recognized is the difference between cash received and the allocated basis of the
loans sold, less the related transaction costs. The allocated basis of the loans is determined at the sale date and is the result of the allocation of
basis between the loans sold and the associated servicing right calculated in accordance with SFAS No. 140. Nonrefundable fees and direct
costs associated with the origination of mortgage loans are deferred and recognized when the related loans are sold.
Gain on Sales of Loans Held-for-Sale and Securities, net —Gain on sales of loans held-for-sale and securities, net, includes gains or losses
resulting from sales of loans which the Bank purchases for resale; the sale or impairment of the Bank’ s available-for-sale mortgage-backed and
investment securities; and gains or losses on financial derivatives that are not accounted for as hedging instruments under SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities . Gains or losses resulting from the sale of Bank loans held-for-sale are
recognized at the date of settlement and are based on the difference between the cash received and the carrying value of the related loans less
related transaction costs. Nonrefundable fees and direct costs associated with the origination of mortgage loans are deferred and recognized
when the related loans are sold. Gains or losses resulting from the sale of available-for-sale securities are recognized at the trade date based on
the difference between the cash received and the amortized cost of the specific securities sold. Impairment of interest-only securities are
recognized when the security’ s fair value is less than its amortized cost and if the current present value of estimated cash flows have decreased
since the last periodic estimate.
Other Banking-Related Revenues —Other banking-related revenues consist primarily of ATM transaction fees and other fees imposed on
deposit accounts. Fees are recognized in the period the ATM transaction is processed or the deposit fee is assessed.
Banking Interest Income —Banking interest income is primarily comprised of interest earned on the bank’ s assets, consisting primarily of loans
receivable and mortgage-backed and investment securities, as well as investment securities and other interest-earning assets. Interest income
includes the effect of hedges of the Company’ s interest-earning assets and is recognized as earned.
Banking Interest Expense —Banking interest expense is incurred through interest-bearing banking liabilities that include customer deposits,
repurchase agreements, advances from the FHLB and other borrowings. Interest expense includes the effect of hedges of the Company’ s
interest-bearing liabilities.
Advertising Costs —Advertising production costs are expensed when the initial advertisement is run. Costs of communicating advertising are
expensed as the services are received. The Company incurred $45.6 million in fiscal 2002, $69.9 million in fiscal 2001, $41.2 million in the
three months ended December 31, 2000 and $149.4million in fiscal 2000 in advertising costs.
Technology Development Costs —Technology development costs are charged to operations as incurred. Technology development costs include
costs incurred in the development and enhancement of software used in connection with services provided by the Company that do not
otherwise qualify for capitalization treatment as internally developed software costs in accordance with SOP 98-1 .
Stock-Based Compensation —At December 31, 2002, the Company has stock-based employee compensation plans, which are described more
fully in Note 20. The Company accounts for the plans under SFAS No. 123, Accounting for Stock-Based Compensation , as amended by SFAS
No. 148, Accounting for Stock-Based
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2003. EDGAR Online, Inc.