JP Morgan Chase 2003 Annual Report Download - page 89

betw een the Firm, QSPEs and nonconsolidated VIEs are reflected
on JPM organ Chase’s Consolidated balance sheet or in the
Notes to consolidated financial statements.
Investments in companies that are considered to be voting-
interest entities under FIN 46, in w hich the Firm has significant
influence over operating and financing decisions (generally
defined as ow ning a voting or economic interest of 20% to
50% ), are accounted for in accordance w ith the equity method
of accounting. These investments are generally included in
Other assets, and the Firm’s share of income or loss is included
in Other revenue. For a discussion of private equity investments,
see Note 15 on page 106 of this Annual Report.
Assets held for clients in an agency or fiduciary capacity by the
Firm are not assets of JPM organ Chase and are not included in
the Consolidated balance sheet.
Certain amounts in prior periods have been reclassified to
conform to the current presentation.
Use of estimates in the preparation of consolidated
financial statements
The preparation of consolidated financial statements requires
management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenue, expense and dis-
closures of contingent assets and liabilities. Actual results could
be different from these estimates.
Foreign currency translation
Assets and liabilities denominated in foreign currencies are
translated into U.S. dollars using applicable rates of exchange.
JPM organ Chase translates revenues and expenses using
exchange rates at the transaction date.
Gains and losses relating to translating functional currency
financial statements for U.S. reporting are included in Other
comprehensive income (loss) w ithin Stockholders’ equity. Gains
and losses relating to nonfunctional currency transactions,
including non-U.S. operations w here the functional currency
is the U.S. dollar and operations in highly inflationary environ-
ments, are reported in the Consolidated statement of income.
Statement of cash flows
For JPM organ Chase’s Consolidated statement of cash flow s,
cash and cash equivalents are defined as those amounts
included in Cash and due from banks.
Significant accounting policies
The follow ing table identifies JPM organ Chase’s significant
accounting policies and the Note and page w here a detailed
description of each policy can be found:
Trading activities Note 3 Page 87
Other noninterest revenue Note 4 Page 88
Postretirement employee benefit plans Note 6 Page 89
Employee stock-based incentives Note 7 Page 93
Securities Note 9 Page 96
Securities financing activities Note 10 Page 98
Loans Note 11 Page 98
Allowance for credit losses Note 12 Page 100
Loan securitizations Note 13 Page 100
Variable interest entities Note 14 Page 103
Private equity investments Note 15 Page 106
Goodwill and other intangibles Note 16 Page 107
Premises and equipment Note 17 Page 109
Income taxes Note 24 Page 113
Derivative instruments and hedging activities Note 28 Page 116
Off–balance sheet lending-related financial instruments
and guarantees Note 29 Page 117
Fair value of financial instruments Note 31 Page 120
Business changes and developments
Agreement to merge with Bank One Corporation
On January 14, 2004, JPM organ Chase and Bank One
Corporation (“ Bank One” ) announced an agreement to merge.
The merger agreement, w hich has been approved by the boards
of directors of both companies, provides for a stock-for-stock
merger in w hich 1.32 shares of JPM organ Chase common stock
w ill be exchanged, on a tax-free basis, for each share of Bank
One common stock. The merged company, headquartered in
New York, will be know n as J.P. M organ Chase & Co. and
w ill continue to trade on the New York Stock Exchange under
the symbol JPM .
The merger is subject to approval by the shareholders of both
institutions as w ell as U.S. federal and state and non-U.S. regu-
latory authorities. Completion of the transaction is expected to
occur in mid-2004.
Acquisition of the Providian Master Trust
On February 5, 2002, JPM organ Chase acquired the Providian
M aster Trust from Providian National Bank. The acquisition
consisted of credit card receivables of approximately $7.9 billion
and related relationships. The acquired portfolio consisted of
approximately 3.3 million credit card accounts.
Trading activities
Trading assets include debt and equity securities held for trading
purposes that JPM organ Chase ow ns (“ long” positions). Trading
liabilities include debt and equity securities that the Firm has sold
to other parties but does not ow n (“ short” positions). The Firm
is obligated to purchase securities at a future date to cover the
short positions. Included in Trading assets and Trading liabilities
Note 3
Note 2
J.P. Morgan Chase & Co. / 2003 Annual Report 87