Charles Schwab 2008 Annual Report Download - page 65

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THE CHARLES SCHWAB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Millions, Except Per Share Data, Option Price Amounts, Ratios, or as Noted)
- 51 -
SFAS No. 160 – Noncontrolling Interests in Consolidated Financial Statements, was issued in December 2007 and is effective
beginning January 1, 2009. This statement amends Accounting Research Bulletin No. 51 – Consolidated Financial Statements
by establishing financial statement presentation and disclosure requirements for reporting noncontrolling ownership interests.
SFAS No. 160 also establishes consistent accounting methods for changes in ownership interest and for the valuation of
retained noncontrolling investments upon deconsolidation. The adoption of SFAS No. 160 is not expected to have a material
impact on the Company’s financial position, results of operations, EPS, or cash flows.
SFAS No. 161 – Disclosures about Derivative Instruments and Hedging Activities, was issued in March 2008 and is effective
beginning January 1, 2009. This statement amends the disclosure requirements of SFAS No. 133 – Accounting for Derivative
Instruments and Hedging Activities by requiring qualitative disclosures about objectives and strategies for using derivatives,
quantitative disclosures about fair values and gains and losses on derivative instruments, and disclosures about credit-risk
related contingent features in derivative agreements. SFAS No. 161 does not require any new derivative or hedging
measurements. The adoption of SFAS No. 161 will not impact the Company’s financial position, results of operations, EPS,
or cash flows, but will expand the disclosures in the Company’s condensed consolidated financial statements.
FASB Staff Position (FSP) on EITF Issue 03-6-1 (FSP EITF 03-6-1) – Determining Whether Instruments Granted in Share-
Based Payment Transactions are Participating Securities, was issued in June 2008 and is effective beginning January 1, 2009.
This statement requires the inclusion of unvested share-based payment awards with non-forfeitable rights to dividends or
dividend equivalents as participating securities in the computation of EPS under the two-class method described in SFAS
No. 128 – Earnings per Share. The requirements of this statement require retrospective adjustment to all prior-period EPS
data presented. Early adoption is prohibited. The Company is currently evaluating the impact of the adoption of FSP EITF 03-
6-1 on its disclosures of EPS. The adoption of FSP EITF 03-6-1 will not impact the Company’s financial position, results of
operations, or cash flows.
3. Receivables from Brokerage Clients
Receivables from brokerage clients are stated net of allowance for doubtful accounts of $4 million and $1 million at
December 31, 2008 and 2007, respectively. Receivables from brokerage clients consist primarily of margin loans to brokerage
clients of $6.2 billion and $11.6 billion at December 31, 2008 and 2007, respectively. Securities owned by brokerage clients
are held as collateral for margin loans. Such collateral is not reflected in the consolidated financial statements. Charge-offs
related to margin loans were not material in 2008, 2007 and 2006. The average yield earned on margin loans was 5.95% and
8.00% in 2008 and 2007, respectively.
4. Other Securities Owned
A summary of other securities owned is as follows:
December 31, 2008 2007
Schwab Funds money market funds $ 440 $ 413
Fixed income, equity, and other securities 124 175
Equity and bond mutual funds 62 87
Total other securities owned (1) $ 626 $ 675
(1) Amounts include securities pledged of $7 million in 2008 and $6 million in 2007.
The Company’s positions in Schwab Funds money market funds arise from certain overnight funding of clients’ redemption,
check-writing, and debit card activities. Fixed income, equity, and other securities include investments made by the Company
relating to its deferred compensation plan and fixed income securities held to meet clients’ trading activities. Equity and bond
mutual funds include mutual fund investments held at CSC and inventory maintained to facilitate certain Schwab Funds and
third-party mutual fund clients’ transactions.