Comerica 2014 Annual Report Download - page 97

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
F-60
Net income attributable to common shares is 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.
Recently Adopted Accounting Pronouncement
Effective January 1, 2014, the Corporation early adopted Accounting Standards Update (ASU) No. 2014-01, “Investments-
Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects,” an
amendment to GAAP 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 other
benefits received, with the results of the investment presented on a net basis as a component of the provision for income taxes.
Previously, LIHTC investments were accounted for under the cost or equity method, and the amortization was recorded as a
reduction to other noninterest income, with the tax credits and other benefits received recorded as a component of the provision
for income taxes. The Corporation believes the proportional amortization method more appropriately represents the economics of
LIHTC investments and provides users with a better understanding of the returns from such investments than the cost or equity
method.
The cumulative effect of the retrospective application of the change in amortization method was a $3 million decrease
to both "accrued income and other assets" and "retained earnings" on the consolidated balance sheets as of January 1, 2013. The
consolidated financial statements have been retrospectively adjusted to reflect the prior period effect of the adoption of the
amendment, which resulted in increases of $56 million and $52 million to both "other noninterest income" and "provision for
income taxes" for the years ended December 31, 2013 and 2012, respectively. The adoption of ASU 2014-01 had no effect on net
income or earnings per common share for any period presented.
See Note 9 for additional information regarding LIHTC and other tax credit investments.
Pending Accounting Pronouncements
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.
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” (ASU 2014-09),
which is intended to improve and converge the financial reporting requirements for revenue contracts with customers. Previous
GAAP comprised broad revenue recognition concepts along with numerous industry-specific requirements. The new guidance
establishes a five-step model which entities must follow to recognize revenue and removes inconsistencies and weaknesses in
existing guidance. ASU 2014-09 is effective for annual and interim periods beginning after December 15, 2016, and must be
retrospectively applied. Entities will have the option of presenting prior periods as impacted by the new guidance or presenting
the cumulative effect of initial application along with supplementary disclosures. Early adoption is prohibited. The Corporation
is currently evaluating the impact of adopting ASU 2014-09.
In June 2014, the FASB issued ASU No. 2014-12, “Compensation-Stock Compensation (Topic 718): Accounting for
Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite
Service Period,” (ASU 2014-12). The new guidance requires that a performance target that affects vesting and that could be