Huntington National Bank 2004 Annual Report Download - page 108

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS HUNTINGTON BANCSHARES INCORPORATED
Hedging Activities, should not consider the expected future cash flows related to the associated servicing of the future loan. Prior to
SAB 105, Huntington did not consider the expected future cash flows related to the associated servicing in determining the fair value of
loan commitments. The adoption of SAB 105 did not have a material effect on Huntington’s financial results.
–FASB S TAFF P OSITION N O . 106-2, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug,
Improvement and Modernization Act of 2003
(FSP 106-2) — In December 2003, a law was approved that expands Medicare
benefits, primarily adding a prescription drug benefit for Medicare-eligible retirees beginning in 2006. The law also provides a
federal subsidy to companies that sponsor postretirement benefit plans providing prescription drug coverage. FSP 106-2 was issued
in May 2004 and supersedes FSP 106-1 issued in January 2004. FSP 106-2 specifies that any Medicare subsidy must be taken into
account in measuring the employer’s postretirement health care benefit obligation and will also reduce the net periodic
postretirement cost in future periods. The new guidance is effective for the reporting periods beginning on or after June 15, 2004.
The impact of this new pronouncement was not material to Huntington’s financial condition, results of operations, or cash flows.
–AICPA Statement of Position No. 03-3, A ccounting for Certain Loans or Debt Securities Acquired in a Transfer (SOP
03-3) — In December 2003, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants
issued SOP 03-3 to address accounting for differences between the contractual cash flows of certain loans and debt securities and the
cash flows expected to be collected when loans or debt securities are acquired in a transfer and those cash flow differences are
attributable, at least in part, to credit quality. As such, SOP 03-3 applies to loans and debt securities purchased or acquired in purchase
business combinations and does not apply to originated loans. The application of SOP 03-3 limits the interest income, including
accretion of purchase price discounts, that may be recognized for certain loans and debt securities. Additionally, SOP 03-3 requires
that the excess of contractual cash flows over cash flows expected to be collected (nonaccretable difference) not be recognized as an
adjustment of yield or valuation allowance, such as the allowance for credit losses. Subsequent to the initial investment, increases in
expected cash flows generally should be recognized prospectively through adjustment of the yield on the loan or debt security over its
remaining life. Decreases in expected cash flows should be recognized as impairment. SOP 03-3 is effective for loans and debt securities
acquired in fiscal years beginning after December 15, 2004, with early application encouraged. The impact of this new pronouncement
is not expected to be material to Huntington’s financial condition, results of operations, or cash flows.
–FASB Staff Position No. 109-2, Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within
the American Jobs Creation Act of 2004
— On October 22, 2004, the American Jobs Creation Act (the Act) was signed into law.
The Act introduces a special one-time dividends received deduction on the repatriation of certain foreign earnings to a U.S.
taxpayer, provided certain criteria are met. Huntington may elect to apply this provision to qualifying earnings repatriations in
2005. Huntington has begun an evaluation of the effects of the repatriation provision as it applies to earnings from foreign asset
securitization activities. However, Huntington does not expect to be able to complete this evaluation until after Congress or the
Treasury Department provides additional clarifying language on key elements of the provision.
The FASB staff believes that the lack of clarification of certain provisions within the Act and the timing of the enactment necessitate
a practical exception to the Statement No. 109, Accounting for Income Taxes (SFAS 109) requirement to reflect in the period of
enactment of the effect of a new tax law. Accordingly, in December 2004, the FASB issued FSP 109-2, which allows Huntington time
beyond the fourth quarter of 2004, the period of enactment, to evaluate the effect of the Act on its plan for reinvestment or
repatriation of foreign earnings for purposes of applying SFAS 109.
At December 31, 2004, the range of possible amounts that Huntington is considering for repatriation under this provision is
between zero and $89.0 million. The related potential range of income tax is between zero and $4.7 million.
–FASB S TATEMENT N O . 123 ( REVISED 2004), Share-Based Payment (Statement 123R) — Statement 123R was issued in
December 2004, to provide investors and other users of financial statements with more complete financial information by requiring
that the compensation cost relating to share-based payment transactions be recognized in the financial statements. That cost will be
measured based on the fair value of the equity or liability instruments issued. Statement 123R covers a wide range of share-based
compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights,
and employee share purchase plans. Statement 123R replaces FASB Statement No. 123, Accounting for Stock-Based Compensation
(Statement 123), and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees (APB 25). Statement 123, as
originally issued in 1995, established as preferable a fair-value-based method of accounting for share-based payment transactions
with employees. However, that Statement permitted entities the option of continuing to apply the guidance in APB 25, as long as
the footnotes to financial statements disclosed pro forma net income under the preferable fair-value-based method. Public entities
(other than those filing as small business issuers) will be required to apply Statement 123(R) as of the first interim or annual
reporting period that begins after June 15, 2005. Effective January 1, 2005, Huntington has adopted Statement 123R. See Note 1 for
the current accounting policy on share-based payments and Note 16 for the share-based payment disclosures.
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