eTrade 2008 Annual Report Download - page 106

Note 20—Employee Share-Based Payments and Other Benefits. Additionally, the Company elected to adopt
FASB Staff Position No. FAS 123(R)-3-Transition Election Related to Accounting for the Tax Effects of Share-
Based Payment Awards. This allows the Company to use the alternative transition method provided for
calculating the tax effects of share-based compensation pursuant to SFAS No. 123(R).
New Accounting Standards—Below are the new accounting pronouncements that relate to activities in
which the Company is engaged.
SFAS No. 156—Accounting for Servicing Financial Assets
In March 2006, the FASB issued SFAS No. 156. This statement establishes, among other things, the
accounting for all separately recognized servicing assets and liabilities. The Company adopted this statement on
January 1, 2007. As of January 1, 2008, the Company elected to account for servicing rights under the fair value
measurement method. The transition adjustment to opening retained earnings as of January 1, 2008 related to the
fair value measurement election was $0.3 million.
SFAS No. 157—Fair Value Measurements
In September 2006, the FASB issued SFAS No. 157, which establishes, among other things, a framework
for measuring fair value and expands disclosure requirements as they relate to fair value measurements. The
Company adopted this statement on January 1, 2008 for financial assets and financial liabilities and for
nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the consolidated
financial statements on a recurring basis, the effects of which were not material to the financial condition, results
of operations or cash flows. The Company will not adopt certain provisions of this statement until January 1,
2009 as they relate to nonfinancial assets and nonfinancial liabilities that are not recognized or disclosed at fair
value in the consolidated financial statements on a recurring basis. The Company does not expect the adoption of
these provisions to have a material impact on the Company’s financial condition, results of operations or cash
flows in future periods. In October 2008, the FASB issued FASB Staff Position (“FSP”) No. FAS 157-3,
Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active (“FSP No. FAS
157-3”), which clarifies the application of SFAS No. 157 in a market that is not active. The adoption of FSP No.
FAS 157-3, which was effective upon issuance for prior periods for which the financial statements had not been
issued, did not have a material impact on the Company’s financial condition, results of operations or cash flows.
For additional information regarding the adoption of SFAS No. 157, see Note 6—Fair Value Disclosures.
SFAS No. 159—The Fair Value Option for Financial Assets and Financial Liabilities
In February 2007, the FASB issued SFAS No. 159, which provides an option under which a company may
irrevocably elect fair value as the initial and subsequent measurement attribute for certain financial assets and
financial liabilities. This fair value option is available on a contract-by-contract basis with changes in fair value
recognized in earnings as those changes occur. The Company adopted this statement on January 1, 2008 and
elected the fair value option for its Fannie Mae and Freddie Mac preferred stock. The impact of this adoption was
an after-tax decrease to opening retained earnings as of January 1, 2008 of approximately $86.9 million.
SFAS No. 141R—Business Combinations
In December 2007, the FASB issued SFAS No. 141R, Business Combinations. This statement applies to all
transactions or other events in which an entity obtains control of one or more businesses, including those
sometimes referred to as “true mergers” or “mergers of equals” and combinations achieved without the transfer
of consideration, for example, by contract alone or through the lapse of minority veto rights. This statement will
be applied prospectively to business combinations for which the acquisition date is on or after the first annual
reporting period beginning on or after December 15, 2008, or January 1, 2009 for the Company.
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