JP Morgan Chase 2005 Annual Report Download - page 136

134 JPMorgan Chase & Co. /2005 Annual Report
Glossary of terms
JPMorgan Chase & Co.
ACH: Automated Clearing House.
APB: Accounting Principles Board Opinion.
APB 25: “Accounting for Stock Issued to Employees.”
Assets under management: Represent assets actively managed by
Asset & Wealth Management on behalf of institutional, private banking,
private client services and retail clients. Excludes assets managed by American
Century Companies, Inc., in which the Firm has a 43% ownership interest.
Assets under supervision: Represent assets under management as well as
custody, brokerage, administration and deposit accounts.
Average managed assets: Refers to total assets on the Firm’s balance
sheet plus credit card receivables that have been securitized.
Contractual credit card charge-off: In accordance with the Federal
Financial Institutions Examination Council policy, credit card loans are
charged off by the end of the month in which the account becomes 180 days
past due or within 60 days from receiving notification of the filing of bank-
ruptcy, whichever is earlier.
Core deposits: U.S. deposits insured by the Federal Deposit Insurance
Corporation, up to the legal limit of $100,000 per depositor.
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 protection buyer and protection seller at the
inception of a transaction, and such events include bankruptcy, insolvency
and failure to meet payment obligations when 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 cycle: a period of time over which credit quality improves, deteriorates
and then improves again. While portfolios may differ in terms of risk, the
credit cycle is typically driven by many factors, including market events and
the economy. The duration of a credit cycle can vary from a couple of years
to several years.
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 46R: FASB Interpretation No. 46 (revised December 2003),
“Consolidation of Variable Interest Entities, an interpretation of Accounting
Research Bulletin No. 51.”
FIN 47: FASB Interpretation No. 47, “Accounting for Conditional Asset
Retirement Obligations – an interpretation of FASB Statement No. 143.”
FSP SFAS 106-2: “Accounting and Disclosure Requirements Related to the
Medicare Prescription Drug, Improvement and Modernization Act of 2003.”
Interests in Purchased Receivables: Represent an ownership interest in
a percentage of cash flows of an underlying pool of receivables transferred by
a third-party seller into a bankruptcy remote entity, generally a trust, and then
financed through a commercial paper conduit.
Investment-grade: An indication of credit quality based upon JPMorgan
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.
Mark-to-market exposure: A measure, at a point in time, of the value
of a derivative or foreign exchange contract in the open market. When the
mark-to-market value is positive, it indicates the counterparty owes JPMorgan
Chase and, therefore, creates a repayment risk for the Firm. When the mark-
to-market value is negative, JPMorgan Chase owes the counterparty. In this
situation, the Firm does not have repayment risk.
Master netting agreement: An agreement between two counterparties
that have multiple derivative contracts with each other that provides for the
net settlement of all contracts through a single payment, in a single currency,
in the event of default on or termination of any one contract. See FIN 39.
NA: Data is not applicable or available for the period presented.
Net yield on interest-earning assets: The average rate for interest-
earning assets less the average rate paid for all sources of funds.
NM: Not meaningful.
Nonoperating litigation reserve charges and recoveries are the
$208 million insurance recovery in the fourth quarter of 2005; the $1.9 billion
charge taken in the second quarter of 2005; the $900 million charge taken
in the first quarter of 2005; and the $3.7 billion charge taken in the second
quarter of 2004; all of which relate to the legal cases named in the JPMorgan
Chase Quarterly Report on Form 10–Q for the quarter ended September 30,
2004.
Overhead ratio: Noninterest expense as a percentage of total net revenue.
Return on common equity-goodwill: Represents net income applicable
to common stock divided by total average common equity (net of goodwill).
The Firm uses return on equity less goodwill, a non-GAAP financial measure,
to evaluate the operating performance of the Firm. The Firm also utilizes this
measure to facilitate operating comparisons to other competitors.
SFAS: Statement of Financial Accounting Standards.
SFAS 13: “Accounting for Leases.”
SFAS 87: “Employers’ Accounting for Pensions.”
SFAS 88: “Employers’ Accounting for Settlements and Curtailments of
Defined Benefit Pension Plans and for Termination Benefits.”
SFAS 106: “Employers’ Accounting for Postretirement Benefits
Other Than Pensions.”
SFAS 107: “Disclosures about Fair Value of Financial Instruments.”
SFAS 109: “Accounting for Income Taxes.”
SFAS 114: “Accounting by Creditors for Impairment of a Loan.”
SFAS 115: “Accounting for Certain Investments in Debt and Equity Securities.”
SFAS 123: “Accounting for Stock-Based Compensation.”
SFAS 123R: “Share-Based Payment.”
SFAS 128: “Earnings per Share.”
SFAS 133: “Accounting for Derivative Instruments and Hedging Activities.”
SFAS 138: “Accounting for Certain Derivative Instruments and Certain
Hedging Activities – an amendment of FASB Statement No. 133.”