Fifth Third Bank 2008 Annual Report Download - page 66

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
64 Fifth Third Bancorp
instruments and certain other items at fair value, on an
instrument-by-instrument basis. Once an entity has elected to
record eligible items at fair value, the decision is irrevocable and
the entity should report unrealized gains and losses on items for
which the fair value option has been elected in earnings. On
January 1, 2008, upon adoption of this Statement, the Bancorp
elected to prospectively measure at fair value, residential mortgage
loans originated on or after January 1, 2008 that have a
designation as held for sale. Prior to the Bancorp's adoption of
SFAS No. 159 for residential mortgage loans held for sale,
mortgage loan origination fees and costs were capitalized as part
of the carrying amount of the loan and recognized as a reduction
of mortgage banking net revenue upon the sale of the loans.
Subsequent to the adoption, mortgage loan origination costs are
recognized as an expense when incurred and included in
noninterest expense within the Consolidated Statements of
Income. For the year ended December 31, 2008, the adoption of
SFAS No. 159 resulted in the recognition of approximately $65
million in mortgage loan origination fees and costs in noninterest
expense.
In December 2007, the FASB issued SFAS No. 141(R),
“Business Combinations” which supercedes SFAS No. 141,
“Business Combinations." This Statement retains the
fundamental requirements in SFAS No. 141 that the acquisition
method of accounting (formerly referred to as purchase method)
be used for all business combinations and that an acquirer be
identified for each business combination. This Statement defines
the acquirer as the entity that obtains control of one or more
businesses in the business combination and establishes the
acquisition date as of the date that the acquirer achieves control.
This Statement requires an acquirer to recognize the assets
acquired, the liabilities assumed, and any noncontrolling interest in
the acquiree at the acquisition date, measured at their fair values.
This Statement requires the acquirer to generally recognize
acquisition-related costs and restructuring costs separately from
the business combination as period expenses. The Bancorp's
adoption of this statement will impact the accounting and
reporting of business combinations for which the acquisition date
is on or after January 1, 2009.
In December 2007, the FASB issued SFAS No. 160,
"Noncontrolling Interests in Consolidated Financial Statements -
an Amendment to ARB No. 51." This Statement establishes new
accounting and reporting standards that require the ownership
interests in subsidiaries held by parties other than the parent be
clearly identified, labeled, and presented in the consolidated
statement of financial position within equity, but separate from
the parent's equity. The Statement also requires the amount of
consolidated net income attributable to the parent and to the
noncontrolling interest be clearly identified and presented on the
face of the consolidated statement of income. In addition, when a
subsidiary is deconsolidated, any retained noncontrolling equity
investment in the former subsidiary shall be initially measured at
fair value, with the gain or loss on the deconsolidation of the
subsidiary measured using the fair value of any noncontrolling
equity investment rather than the carrying amount of that retained
investment. SFAS No. 160 also clarifies that changes in a parent's
ownership interest in a subsidiary that do not result in
deconsolidation are equity transactions if the parent retains its
controlling financial interest. The Statement also includes
expanded disclosure requirements regarding the interests of the
parent and its noncontrolling interest. The adoption of this
Statement on January 1, 2009 will not have a material impact on
the Bancorp’s Consolidated Financial Statements.
In March 2008, the FASB issued SFAS No. 161, "Disclosures
about Derivative Instruments and Hedging Activities - an
Amendment of FASB Statement 133". This Statement enhances
required disclosures regarding derivatives and hedging activities,
including enhanced disclosures regarding how: (a) an entity uses
derivative instruments; (b) derivative instruments and related
hedged items are accounted for under SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities";
and (c) derivative instruments and related hedged items affect an
entity's financial position, financial performance, and cash flows.
SFAS No. 161 is effective for fiscal years and interim periods
beginning after November 15, 2008.
In November 2007, the SEC issued Staff Accounting Bulletin
(SAB) No. 109, "Written Loan Commitments Recorded at Fair
Value through Earnings." This SAB supersedes SAB No. 105,
"Application of Accounting Principles to Loan Commitments",
and expresses the current view of the staff that, consistent with
guidance in SFAS No. 156 and No. 159, the expected net future
cash flows related to the associated servicing of a loan should be
included in the measurement of all written loan commitments that
are accounted for at fair value through earnings. Additionally, this
SAB expands the SAB No. 105 view that internally-developed
intangible assets should not be recorded as part of the fair value
for any written loan commitments that are accounted for at fair
value through earnings. The adoption of SAB No. 109 on January
1, 2008 did not have a material impact on the Bancorp’s
Consolidated Financial Statements.
In June 2008, the FASB issued FSP No. EITF 03-6-1,
"Determining Whether Instruments Granted in Share-Based
Payment Transactions Are Participating Securities." This FSP
provides that unvested share-based payment awards that contain
nonforfeitable rights to dividends or dividend equivalents
(whether paid or unpaid) are participating securities and shall be
included in the computation of earnings per share pursuant to the
two-class method described in paragraphs 60 and 61 of SFAS No.
128, "Earnings per Share". This FSP is effective for financial
statements issued for fiscal years beginning after December 15,
2008, and interim periods within those years. All prior-period
earnings per share data presented will be adjusted retrospectively
(including interim financial statements, summaries of earnings,
and selected financial data) to conform with the provisions of this
FSP. Early application is not permitted. The Bancorp's adoption
of this FSP on January 1, 2009 will result in a retrospective
adjustment of earnings per share previously reported in 2008.
Upon applying this FSP in 2009, the Bancorp's basic and diluted
earnings per share for the years ended December 31, 2008, 2007
and 2006 will be adjusted as follows:
As Reported
Upon Adoption of
FSP EITF 03-6-1
2008
Earnings Per Share ($3.94) ($3.91)
Earnings Per Diluted Share (3.94) (3.91)
2007
Earnings Per Share $2.00 $1.99
Earnings Per Diluted Share 1.99 1.98
2006
Earnings Per Share $2.14 $2.13
Earnings Per Diluted Share 2.13 2.12
In July 2006, the FASB issued Interpretation (FIN) No. 48,
“Accounting for Uncertainty in Income Taxes - An Interpretation
of FASB Statement No. 109.” This Interpretation clarifies the
accounting for uncertainty in income taxes recognized in
accordance with SFAS No. 109, “Accounting for Income Taxes.”
This Interpretation also prescribes a recognition threshold and
measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a
tax return. This Interpretation also provides guidance on
derecognition, classification, interest and penalties, accounting in
interim periods, disclosure and transition. The evaluation of a tax
position in accordance with this Interpretation is a two-step
process. The first step is a recognition process to determine
whether it is more-likely-than-not that a tax position will be
sustained upon examination, including resolution of any related