Fifth Third Bank 2013 Annual Report Download - page 101

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
99 Fifth Third Bancorp
Stock-Based Compensation
The Bancorp recognizes compensation expense for the grant-date
fair value of stock-based awards that are expected to vest over the
requisite service period. All awards, both those with cliff vesting and
graded vesting, are expensed on a straight-line basis. Awards to
employees that meet eligible retirement status are expensed
immediately. As compensation expense is recognized, a deferred tax
asset is recorded that represents an estimate of the future tax
deduction from exercise or release of restrictions. At the time
awards are exercised, cancelled, expire, or restrictions are released,
the Bancorp may be required to recognize an adjustment to income
tax expense for the difference between the previously estimated tax
deduction and the actual tax deduction realized. For further
information on the Bancorp’s stock-based compensation plans, see
Note 24.
Pension Plans
The Bancorp uses an expected long-term rate of return applied to
the fair market value of assets as of the beginning of the year and
the expected cash flow during the year for calculating the expected
investment return on all pension plan assets. Amortization of the
net gain or loss resulting from experience different from that
assumed and from changes in assumptions (excluding asset gains
and losses not yet reflected in market-related value) is included as a
component of net periodic benefit cost. If, as of the beginning of
the year, that net gain or loss exceeds 10% of the greater of the
projected benefit obligation and the market-related value of plan
assets, the amortization is that excess divided by the average
remaining service period of participating employees expected to
receive benefits under the plan. The Bancorp uses a third-party
actuary to compute the remaining service period of participating
employees. This period reflects expected turnover, pre-retirement
mortality, and other applicable employee demographics.
Other
Securities and other property held by Fifth Third Investment
Advisors, a division of the Bancorp’s banking subsidiary, in a
fiduciary or agency capacity are not included in the Consolidated
Balance Sheets because such items are not assets of the subsidiaries.
Investment advisory revenue in the Consolidated Statements of
Income is recognized on the accrual basis. Investment advisory
service revenues are recognized monthly based on a fee charged per
transaction processed and/or a fee charged on the market value of
average account balances associated with individual contracts.
The Bancorp recognizes revenue from its card and processing
services on an accrual basis as such services are performed,
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
Disclosures about Offsetting Assets and Liabilities
In December 2011, and clarified in January 2013, 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 was required to be applied
retrospectively and was effective for fiscal years, and interim periods
within those years, beginning on or after January 1, 2013. The
amended guidance was adopted by the Bancorp on January 1, 2013
and the required disclosures are included in Note 13.
Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive
Income
In February 2013, the FASB issued amended guidance related to
amounts reclassified out of AOCI. The amended guidance requires
the Bancorp to present, either on the face of the Consolidated
Statements of Income or in the Notes to Consolidated Financial
Statements, significant amounts reclassified out of AOCI by the
respective line items of net income but only if the amount
reclassified is required under U.S. GAAP to be reclassified to net
income in its entirety in the same reporting period. For other
amounts that are not required to be reclassified in their entirety, the
Bancorp is required to cross-reference to other disclosures required
under U.S. GAAP that provide additional detail about those
amounts. The amended guidance was effective prospectively for
reporting periods beginning after December 15, 2012 and was
adopted by the Bancorp on January 1, 2013. The required
disclosures are included in Note 22.
Obligations Resulting from Joint and Several Liability Arrangements for Which
the Total Amount of the Obligation is Fixed at the Reporting Date
In February 2013, the FASB issued amended guidance relating to
the measurement of obligations resulting from joint and several
liability arrangements for which the total amount under the
arrangement is fixed at the reporting date. For the total amount of
an obligation under an arrangement to be considered fixed at the
reporting date, there can be no measurement uncertainty relating to
the total amount of the obligation. The obligation resulting from
joint and several liability arrangements would be measured initially as
the sum of 1) the amount the Bancorp has agreed to pay on the
basis of its arrangement among its co-obligors and 2) any additional
amount the Bancorp expects to pay on behalf of its co-obligors. The
amended guidance also would require the Bancorp to disclose the
nature and amount of the obligation as well as information about
the risks that such obligations pose to future cash flows. The
amended guidance is effective for reporting periods beginning after
December 15, 2013 and will be applied retrospectively to all prior
periods presented for those obligations resulting from joint and
several liability arrangements that exist at the beginning of the fiscal
year of adoption. The Bancorp adopted the amended guidance on