JP Morgan Chase 2008 Annual Report Download - page 150

Notes to consolidated financial statements
148 JPMorgan Chase & Co./ 2008 Annual Report
Changes in level 3 recurring fair value measurements
The tables below include a rollforward of the balance sheet amounts for the years ended December 31, 2008 and 2007 (including the change in
fair value), for financial instruments classified by the Firm within level 3 of the valuation hierarchy. When a determination is made to classify a
financial instrument within level 3, the determination is based upon the significance of the unobservable parameters to the overall fair value
measurement. However, level 3 financial instruments typically include, in addition to the unobservable or level 3 components, observable compo-
nents (that is, components that are actively quoted and can be validated to external sources); accordingly, the gains and losses in the table below
include changes in fair value due in part to observable factors that are part of the valuation methodology. Also, the Firm risk manages the observ-
able components of level 3 financial instruments using securities and derivative positions that are classified within level 1 or 2 of the valuation
hierarchy; as these level 1 and level 2 risk management instruments are not included below, the gains or losses in the tables do not reflect the
effect of the Firm’s risk management activities related to such level 3 instruments.
Fair value measurements using significant unobservable inputs
Change in unrealized
For the year ended Total Purchases, Transfers into gains and (losses) related to
December 31, 2008 Fair value, realized/unrealized issuances and/or Fair value, financial instruments held
(in millions) January 1, 2008 gains/(losses)(c) settlements, net out of level 3(c) December 31, 2008 at December 31, 2008
Assets:
Trading assets:
Debt and equity instruments $ 24,066 $ (12,805)(d)(e) $ 6,201 $ 23,958 $ 41,420 $ (9,860)(d)(e)
Net derivative receivables 633 4,556(d) 2,290 2,028 9,507 1,814(d)
Available-for-sale securities 101 (1,232)(f) 3,772 9,750 12,391 (422)(f)
Loans 8,380 (1,547)(d) 12 (4,178) 2,667 (1,324)(d)
Mortgage servicing rights 8,632 (6,933)(e) 7,704 — 9,403 (6,933)(e)
Other assets:
Private equity investments(a) 6,763 (638)(d) 320 (76) 6,369 (1,089)(d)
All other 3,160 (930)(g) 2,802 (17) 5,015 (742)(g)
Liabilities(b):
Deposits $ (1,161) $ 57(d) $ (79) $ (52) $ (1,235) $ 69(d)
Other borrowed funds (105) 7(d) (53) 50 (101) 24(d)
Trading liabilities:
Debt and equity instruments (480) 73(d) 33 86 (288) 125(d)
Accounts payable and
other liabilities (25) 25(d) —— — —
(d)
Beneficial interests issued by
consolidated VIEs (82) 24(d) 603 (545) — —(d)
Long-term debt (21,938) 4,502(d) 1,717 (829) (16,548) 3,682(d)