Comerica 2013 Annual Report Download - page 95

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
F-62
For further information regarding the Corporation’s defined benefit pension and other postretirement plans, refer to Note
17.
Income Taxes
The provision for income taxes is the sum of income taxes due for the current year and deferred taxes. Deferred taxes
arise from temporary differences between the income tax basis and financial accounting basis of assets and liabilities. Deferred
tax assets are evaluated for realization based on available evidence of loss carry-back capacity, future reversals of existing taxable
temporary differences, and assumptions made regarding future events. A valuation allowance is provided when it is more likely
than not that some portion of the deferred tax asset will not be realized.
The Corporation classifies interest and penalties on income tax liabilities in the “provision for income taxes” on the
consolidated statements of income.
Earnings Per Share
Basic income per common share and net income per common share are calculated using the two-class method. The two-
class method is an earnings allocation formula that determines earnings per share for each share of common stock and participating
securities according to dividends declared (distributed earnings) and participation rights in undistributed earnings. Distributed and
undistributed earnings are allocated between common and participating security shareholders based on their respective rights to
receive dividends. Nonvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents
are considered participating securities (e.g., nonvested restricted stock and restricted stock units). Undistributed net losses are not
allocated to nonvested restricted shareholders, as these shareholders do not have a contractual obligation to fund the losses incurred
by the Corporation. Income attributable to common shares and net income attributable to common shares are then divided by the
weighted-average number of common shares outstanding during the period.
Diluted income per common share and net income per common share consider common stock issuable under the assumed
exercise of stock options granted under the Corporation’s stock plans and warrants. Diluted income attributable to common shares
and net income attributable to common shares are then divided by the total of weighted-average number of common shares and
common stock equivalents outstanding during the period.
Statements of Cash Flows
Cash and cash equivalents are defined as those amounts included in “cash and due from banks”, “federal funds sold” and
“interest-bearing deposits with banks” on the consolidated balance sheets.
Comprehensive Income (Loss)
The Corporation presents on an annual basis the components of net income and other comprehensive income in two
separate, but consecutive statements and presents on an interim basis the components of net income and a total for comprehensive
income in one continuous consolidated statement of comprehensive income.
Pending Accounting Pronouncements
In January 2014, the FASB issued ASU No. 2014-01, “Investments-Equity Method and Joint Ventures (Topic 323):
Accounting for Investments in Qualified Affordable Housing Projects,” (ASU 2014-01), which enables companies that invest in
affordable housing projects that qualify for the low-income housing tax credit (LIHTC) to elect to use the proportional amortization
method if certain conditions are met. Under the proportional amortization method, the initial investment cost of the project is
amortized in proportion to the amount of tax credits and benefits received, with the results of the investment presented on a net
basis as a component of income tax expense (benefit). ASU 2014-01 is effective for interim and annual periods beginning after
December 15, 2014, with early adoption permitted. The Corporation is currently evaluating the impact of adopting ASU 2014-01,
but does not expect the adoption to have a material effect on the Corporation’s financial condition and results of operations.
Also in January 2014, the FASB issued ASU No. 2014-04, “Receivables – Troubled Debt Restructurings by Creditors
(Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure,” (ASU
2014-04), which clarifies when an in-substance foreclosure or repossession of residential real estate property occurs, requiring a
creditor to reclassify the loan to other real estate. According to ASU 2014-04, a consumer mortgage loan should be reclassified to
other real estate either upon the creditor obtaining legal title to the real estate collateral or when the borrower voluntarily conveys
all interest in the real estate property to the creditor through a deed in lieu of foreclosure or similar legal agreement. ASU 2014-04
also clarifies that a creditor should not delay reclassification when a borrower has a legal right of redemption. The Corporation's
current practice is to delay reclassification of foreclosed residential real estate to other real estate until the redemption period, if
any, has expired. The Corporation expects to prospectively adopt ASU 2014-04 in the first quarter 2015 and does not expect the
adoption to have a material effect on the Corporation's financial condition and results of operations. At December 31, 2013,