JP Morgan Chase 2003 Annual Report Download - page 132

130 J.P. Morgan Chase & Co. / 2003 Annual Report
AICPA: American Institute of Certified Public Accountants.
APB: Accounting Principles Board Opinion.
APB 25: “ Accounting for Stock Issued to Employees.”
Asset capital tax: Capital allocated to each business segment
based on its average asset level and certain off-balance sheet
credit-related exposures; reflects the need for the Firm to main-
tain minimum leverage ratios to meet bank regulatory defini-
tions of “ well capitalized.”
Assets Under Management: Represent assets managed by
Investment M anagement & Private Banking on behalf of institu-
tional, retail and private banking clients.
Assets Under Supervision: Represent assets under management
as w ell as custody, brokerage, administration and deposit accounts.
Average Allocated Capital: Represents the portion of average
common stockholders’ equity allocated to the business segments,
based on their respective risks. The total average allocated capi-
tal of all business segments equals the total average common
stockholders’ equity of the Firm.
Average Managed Assets: Includes credit card receivables that
have been securitized.
Basis point value (“BPV”): This measurement quantifies the
change in the market value of assets and liabilities (that are not
part of trading activities) that w ould result from a one-basis-
point change in interest rates or a one-basis-point w idening of
interest rate spreads. BPV show s w hether an increase of 1/100
of 1% (or one basis point) in a market rate w ill yield a profit or
loss, and of w hat magnitude.
bp: Denotes basis points; 100 bp equals 1% .
Credit derivatives are contractual agreements that provide
protection against a credit event of one or more referenced
credits. The nature of a credit event is established by the protec-
tion buyer and protection seller at the inception of a transac-
tion, and such events include bankruptcy, insolvency and failure
to meet payment obligations w hen due. The buyer of the credit
derivative pays a periodic fee in return for a payment by the
protection seller upon the occurrence, if any, of a credit event.
Credit risk: Risk of loss from obligor or counterparty default.
Criticized: An indication of credit quality based on JPM organ
Chase’s internal risk assessment system. “ Criticized” assets gen-
erally represent a risk profile similar to a rating of a CCC+/Caa1
or low er, as defined by the independent rating agencies.
Cross-currency interest rate swaps are contracts that involve
the exchange of both interest and principal amounts in tw o dif-
ferent currencies. Also see Interest rate sw aps in this glossary.
EITF: Emerging Issues Task Force.
EITF Issue 02-3: “ Issues Involved in Accounting for Derivative
Contracts Held for Trading Purposes and Contracts Involved in
Energy Trading and Risk M anagement Activities.”
EITF Issue 03-1: “ The M eaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments.”
FASB: Financial Accounting Standards Board.
FIN 39: FASB Interpretation No. 39, “ Offsetting of Amounts
Related to Certain Contracts.”
FIN 41: FASB Interpretation No. 41, “ Offsetting of Amounts Related
to Certain Repurchase and Reverse Repurchase Agreements.”
FIN 45: FASB Interpretation No. 45, “ Guarantor’s Accounting
and Disclosure Requirement for Guarantees, including Indirect
Guarantees of Indebtedness of Others.”
FIN 46: FASB Interpretation No. 46, “ Consolidation of Variable
Interest Entities, an interpretation of Accounting Research
Bulletin No. 51.”
FSP SFAS 106-1: FASB Staff Position No. SFAS106-1, “ Accounting
and Disclosure Requirements Related to the M edicare Prescrip-
tion Drug, Improvement and M odernization Act of 2003.”
Foreign exchange contracts are contracts that provide for
the future receipt and delivery of foreign currency at previously
agreed-upon terms.
Interest rate options, including caps and floors, are contracts
to modify interest rate risk in exchange for the payment of a pre-
mium w hen the contract is initiated. A w riter of interest rate
options receives a premium in exchange for bearing the risk of
unfavorable changes in interest rates. Conversely, a purchaser of
an option pays a premium for the right, but not the obligation,
to buy or sell a financial instrument or currency at predetermined
terms in the future.
Interest rate swaps are contracts in w hich a series of interest
rate payments in a single currency are exchanged over a pre-
scribed period. An example of a situation in w hich an interest
rate sw ap w ould be used w ould be to convert fixed-rate debt to
a variable rate. By entering into the swap, the principal amount
of the debt w ould remain unchanged, but the interest streams
w ould change from fixed to variable.
Investment-grade: An indication of credit quality based on
JPM organ Chase’s internal risk assessment system. “ Investment-
grade” generally represents a risk profile similar to a rating of a
BBB-/Baa3 or better, as defined by independent rating agencies.
Liquidity risk: The risk of being unable to fund a portfolio of
assets at appropriate maturities and rates, and the risk of being
unable to liquidate a position in a timely manner at a reasonable
price.
Managed credit card receivables or managed basis: Refers
to credit card receivables on the Firm’s balance sheet plus credit
card receivables that have been securitized.
Glossary of terms
J.P. M organ Chase & Co.