Huntington National Bank 2010 Annual Report Download - page 153

asset will be recovered, a valuation allowance is recorded. All positive and negative evidence is reviewed
when determining how much of a valuation allowance is recognized on a quarterly basis. In determining the
requirements for a valuation allowance, sources of possible taxable income are evaluated including future
reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary
differences and carryforwards, taxable income in appropriate carryback years, and tax-planning strategies.
Huntington applies a more likely than not recognition threshold for all tax uncertainties. Huntington reviews
the tax positions quarterly.
Stock Repurchases — Acquisitions of Huntington stock are recorded at cost. The re-issuance of shares is
recorded at weighted-average cost.
Share-Based Compensation — Huntington uses the fair value recognition concept relating to its share-
based compensation plans. Compensation expense is recognized based on the fair value of unvested stock
options and awards over the requisite service period.
Segment Results — Accounting policies for the business segments are the same as those used in the
preparation of the Consolidated Financial Statements with respect to activities specifically attributable to each
business segment. However, the preparation of business segment results requires Management to establish
methodologies to allocate funding costs and benefits, expenses, and other financial elements to each business
segment. Changes are made in these methodologies utilized for certain balance sheet and income statement
allocations performed by Huntington’s management reporting system, as appropriate.
Statement of Cash Flows — Cash and cash equivalents are defined as Cash and due from banks which
includes amounts on deposit with the Federal Reserve and federal funds sold and securities purchased under
resale agreements.
Fair Value Measurements — The Company records certain of its assets and liabilities at fair value. Fair
value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit
price) in the principal or most advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. Fair value measurements are classified within one of three levels
in a valuation hierarchy based upon the transparency of inputs to the valuation of an asset or liability as of the
measurement date. The three levels are defined as follows:
Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or
liabilities in active markets.
Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities
in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for
substantially the full term of the financial instrument.
Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value
measurement.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of
input that is significant to the fair value measurement.
2. ACCOUNTING STANDARDS UPDATE
FASB Accounting Standards Codification (ASC) Topic 810 — Consolidation (Statement No. 167,
Amendments to FASB Interpretation No. 46R) (ASC 810) This accounting guidance was originally issued in
June 2009 and is now included in ASC 810. The guidance amends the consolidation guidance applicable for
VIE. The guidance is effective for financial statements issued for fiscal years and interim periods beginning
after November 15, 2009, and early adoption was prohibited. Huntington previously transferred automobile
loans to a trust in a securitization transaction. With adoption of the amended guidance, the trust was
consolidated as of January 1, 2010. Huntington elected the fair value option under ASC 825, Financial
Instruments, for both the auto loans and the related debt obligations. Total assets increased $621.6 million,
total liabilities increased $629.3 million, and a negative cumulative effect adjustment to OCI and retained
earnings of $6.1 million was recorded. Based upon the current regulatory requirements, the consolidation of
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