Fifth Third Bank 2012 Annual Report Download - page 96

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
94 Fifth Third Bancorp
recording revenues net of certain costs (primarily interchange fees
charged by credit card associations) not controlled by the Bancorp.
The Bancorp purchases life insurance policies on the lives of
certain directors, officers and employees and is the owner and
beneficiary of the policies. The Bancorp invests in these policies,
known as BOLI, to provide an efficient form of funding for long-
term retirement and other employee benefits costs. The Bancorp
records these BOLI policies within other assets in the Consolidated
Balance Sheets at each policy’s respective cash surrender value, with
changes recorded in other noninterest income in the Consolidated
Statements of Income.
Other intangible assets consist of core deposit intangibles,
customer lists, non-compete agreements and cardholder
relationships. Other intangible assets are amortized on either a
straight-line or an accelerated basis over their estimated useful lives.
The Bancorp reviews other intangible assets for impairment
whenever events or changes in circumstances indicate that carrying
amounts may not be recoverable.
Securities sold under repurchase agreements are accounted for
as collateralized financing transactions and included in other short-
term borrowings in the Consolidated Balance Sheets at the amounts
which the securities were sold plus accrued interest.
Acquisitions of treasury stock are carried at cost. Reissuance of
shares in treasury for acquisitions, exercises of stock-based awards
or other corporate purposes is recorded based on the specific
identification method.
Advertising costs are generally expensed as incurred.
Accounting and Reporting Developments
Reconsideration of Effective Control for Repurchase Agreements
In April 2011, the FASB issued amended guidance clarifying when
the Bancorp can recognize a sale upon the transfer of financial
assets subject to a repurchase agreement. That determination is
based, in part, on whether the Bancorp has maintained effective
control over the transferred financial assets. Under the amended
guidance, the FASB concluded that the assessment of effective
control should focus on a transferor’s contractual rights and
obligations with respect to transferred financial assets, not on
whether the transferor has the practical ability to perform in
accordance with those rights or obligations. The amended guidance
was effective for transactions that occur in interim and annual
periods beginning on or after December 15, 2011. The Bancorp
accounts for all of its existing repurchase agreements as secured
borrowings and therefore, the adoption of this amended guidance
on January 1, 2012 did not have a material impact on the Bancorp’s
Consolidated Financial Statements.
Amendments to Achieve Common Fair Value Measurement and Disclosure
Requirements in U.S. GAAP and IFRSs
In May 2011, the FASB issued amended guidance that resulted in
common fair value measurement and disclosure requirements
between U.S. GAAP and IFRS. Under the amended guidance, the
Bancorp is required to expand its disclosure for fair value
instruments categorized within Level 3 of the fair value hierarchy to
include (1) the valuation processes used by the Bancorp; and (2) a
narrative description of the sensitivity of the fair value measurement
to changes in unobservable inputs for recurring fair value
measurements and the interrelationships between those
unobservable inputs, if any. The Bancorp is also required to disclose
the categorization by level of the fair value hierarchy for items that
are not measured at fair value in the statement of financial position
but for which the fair value is required to be disclosed (e.g. portfolio
loans). The amended guidance is to be applied prospectively and was
effective for interim and annual periods beginning after December
15, 2011. The amended guidance was adopted by the Bancorp on
January 1, 2012 and the required disclosures are included in Note 26.
Presentation of Comprehensive Income
In June 2011, the FASB issued amended guidance on the
presentation requirements for comprehensive income. The amended
guidance requires the Bancorp to present total comprehensive
income, the components of net income and the components of
other comprehensive income on the face of the financial statements,
either in a single continuous statement of comprehensive income or
in two separate but consecutive statements. The amended guidance
does not change the items that must be reported in other
comprehensive income or when an item of other comprehensive
income must be reclassified to net income. The amended guidance
was effective for interim and annual periods beginning after
December 15, 2011. This amended guidance was adopted by the
Bancorp on January 1, 2012 and has been applied retrospectively.
The Bancorp presents comprehensive income in two separate but
consecutive statements, and has included the requirements of the
amended guidance in the Consolidated Statements of
Comprehensive Income.
Testing Goodwill for Impairment
In September 2011, the FASB issued amended guidance on testing
goodwill for impairment. The amended guidance simplifies how the
Bancorp is required to test goodwill for impairment and permits the
Bancorp to first assess qualitative factors to determine whether it is
more likely than not that the fair value of a reporting unit is less than
its carrying amount. If, after assessing the totality of events or
circumstances, the Bancorp determines it is not more likely than not
that the fair value of a reporting unit is less than its carrying amount,
then performing the two-step impairment test would be
unnecessary. However, if the Bancorp concludes otherwise, it would
then be required to perform Step 1 of the goodwill impairment test,
and continue to Step 2, if necessary. The amended guidance was
effective for annual and interim goodwill impairment tests
performed for fiscal years beginning after December 15, 2011 and
was adopted by the Bancorp on January 1, 2012. The results of the
Bancorp’s most recent annual impairment test are included in Note
8.
Disclosures about Offsetting Assets and Liabilities
In December 2011, the FASB issued amended guidance related to
disclosures about offsetting assets and liabilities. The amended
guidance requires the Bancorp to disclose both gross information
and net information about financial instruments, including
derivatives, and transactions eligible for offset in the Consolidated
Balance Sheets as well as financial instruments and transactions
subject to agreements similar to a master netting arrangement. The
amended guidance will be applied retrospectively and is effective for
fiscal years, and interim periods within those years, beginning on or
after January 1, 2013.