eTrade 2002 Annual Report Download - page 73

Table of Contents
Index to Financial Statements
IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities , which addresses accounting
for restructuring and similar costs. SFAS No. 146 supersedes previous accounting guidance, principally EITF Issue No. 94-3. SFAS No. 146
requires that the liability for costs associated with an exit or disposal activity be recognized when the liability is incurred. Under Issue 94-3, a
liability for an exit cost was recognized at the date of the Company’ s commitment to an exit plan rather than when the liability is incurred.
SFAS No. 146 also establishes that the liability should initially be measured and recorded at fair value. Accordingly, SFAS No. 146 may affect
the timing of recognizing future restructuring costs as well as the amounts initially recognized. The Company will follow the provisions of
SFAS No. 146 for any restructuring activities which may be initiated after December 31, 2002.
In September 2002, the EITF reached a consensus on Issue 02-15, Determining Whether Certain Conversions of Convertible Debt to Equity
Securities Are within the Scope of FASB Statement No. 84, Induced Conversions of Convertible Debt . SFAS No. 84 applies to all conversions
that occur pursuant to revised conversion privileges that are exercisable only for a limited period of time and result in the issuance of all of the
equity securities issuable pursuant to the original conversion terms of the debt offering, regardless of the party that initiates the offer or whether
the offer relates to all debt holders. The consensus should be applied prospectively to all applicable inducements that close after September 12,
2002. The Company adopted EITF02-15 effective September 12, 2002. Since September 12, 2002, no convertible debt was retired through a
conversion to equity.
In October 2002, the FASB issued SFAS No. 147, Acquisitions of Certain Financial Institutions , which addresses the financial accounting and
reporting for the acquisition of all or part of a financial institution. The statement removes acquisitions of financial institutions from the scope
of FASB Statement No. 72, Accounting for Certain Acquisitions of Banking or Thrift Institutions, and FASB Interpretation No. 9, Applying
APB Opinions No. 16 and 17 When a Savings and Loan Association or Similar Institution Is Acquired in a Business Combination Accounted
for by the Purchase Method. This statement also amends SFAS No. 144, to include long-term customer relationship intangible assets such as
depositor-and-borrower relationship assets. Accordingly, SFAS No. 147 may affect the accounting for future acquisitions of all or part of a
financial institution. The Company adopted the provisions of SFAS No. 147 on October 1, 2002 and its adoption did not have a material impact
on the Company’ s financial condition or results of operations.
In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure , which provides
alternative transition methods for a voluntary change to the fair value based method of accounting for stock-based employee compensation and
prevents the use of the prospective transition method for companies who do not adopt the expensing method for stock compensation in fiscal
2003. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and
quarterly financial statements of the method of accounting for stock-based employee compensation and the effect of the method used on
reported results. The Company has not changed the way it accounts for stock-based employee compensation; however it has adopted the
disclosure provisions of SFASNo.148.
In December 2002, the FASB issued Interpretation (“FIN”) No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others. FIN No. 45 requires a company to disclose many of the guarantees or indemnification
agreements it issues, some of which are required to be recorded as a liability in the company’ s consolidated balance sheet at the time it enters
into the guarantee. FIN No. 45 requires disclosures beginning in interim and year-end financial statements ending after December15, 2002. The
Company has adopted the disclosure provisions. The liability recognition provisions apply prospectively to guarantees issued or modified
beginning January 1, 2003. The Company does not believe the adoption of FIN No. 45 will have a material impact on its consolidated financial
condition.
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2003. EDGAR Online, Inc.