JP Morgan Chase 2006 Annual Report Download - page 147

JPMorgan Chase & Co. / 2006 Annual Report 145
GLOSSARY OF TERMS
JPMorgan Chase & Co.
ACH: Automated Clearing House.
APB 25: Accounting Principles Board Opinion No. 25. “Accounting for Stock
Issued to Employees.”
Assets under management: Represent assets actively managed by
Asset 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.
Beneficial interest issued by consolidated VIEs: Represents the interest
of third-party holders of debt/equity securities, or other obligations, issued by
VIEs that JPMorgan Chase consolidates under FIN 46R. The underlying obliga-
tions of the VIEs consist of short-term borrowings, commercial paper and
long-term debt. The related assets consist of trading assets, available-for-sale
securities, loans and other assets.
Benefit obligation: Refers to the projected benefit obligation for pension
plans and the accumulated postretirement benefit obligation for OPEB plans.
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.
Credit derivatives: 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 or 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. The duration of a credit cycle can vary from a cou-
ple of years to several years.
Discontinued operations: A component of an entity that is classified as
held-for-sale or that has been disposed of from ongoing operations in its
entirety or piecemeal, and for which the entity will not have any significant,
continuing involvement. A discontinued operation may be a separate major
business segment, a component of a major business segment or a geographi-
cal area of operations of the entity that can be separately distinguished oper-
ationally and for financial reporting purposes.
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
Management Activities.”
EITF Issue 99-20: “Recognition of Interest Income and Impairment on
Purchased and Retained Beneficial Interests in Securitized Financial Assets.”
FASB: Financial Accounting Standards Board.
FIN 39: FASB Interpretation No. 39, “Offsetting of Amounts Related to
Certain Contracts – an interpretation of APB Opinion No. 10 and FASB
Statement No. 105.”
FIN 41: FASB Interpretation No. 41, “Offsetting of Amounts Related to
Certain Repurchase and Reverse Repurchase Agreements – an interpretation
of APB Opinion No. 10 and a Modification of FASB Interpretation No. 39.”
FIN 45: FASB Interpretation No. 45, “Guarantor’s Accounting and
Disclosure Requirements for Guarantees, including Indirect Guarantees of
Indebtedness of Others – an interpretation of FASB Statements No. 5, 57 and
107 and a rescission of FASB Interpretation No. 34.”
FIN 46R: FASB Interpretation No. 46 (revised December 2003), “Consolidation
of Variable Interest Entities – an interpretation of ARB No. 51.”
FIN 47: FASB Interpretation No. 47, “Accounting for Conditional Asset
Retirement Obligations – an interpretation of FASB Statement No. 143.”
FIN 48: FASB Interpretation No. 48, “Accounting for Uncertainty in Income
Taxes – an interpretation of FASB Statement No. 109.”
Forward points: Represents the interest rate differential between two cur-
rencies, which is either added to or subtracted from the current exchange rate
(i.e., “spot rate”) to determine the forward exchange rate.
FSP: FASB Staff Position.
FSP FIN 46(R)-6: “Determining the Variability to Be Considered in Applying
FASB Interpretation No. 46(R).”
FSP FAS 123(R)-3: “Transition Election Related to Accounting for the Tax
Effects of Share-Based Payment Awards.”
FSP FAS 13-2: “Accounting for a Change or Projected Change in the Timing
of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease
Transaction.”
Interchange income: A fee that is paid to a credit card issuer in the clear-
ing and settlement of a sales or cash advance transaction.
Interests in purchased receivables: Represent an ownership interest in
cash flows of an underlying pool of receivables transferred by a third-party
seller into a bankruptcy-remote entity, generally a trust.
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.
Managed basis: A non-GAAP presentation of financial results that includes
reclassifications related to credit card securitizations and taxable equivalents.
Management uses this non-GAAP financial measure at the segment level
because it believes this provides information to investors in understanding the
underlying operational performance and trends of the particular business seg-
ment and facilitates a comparison of the business segment with the perform-
ance of competitors.
Managed credit card receivables: Refers to credit card receivables on the
Firm’s balance sheet plus credit card receivables that have been securitized.
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.