JP Morgan Chase 2008 Annual Report Download - page 200

Notes to consolidated financial statements
198 JPMorgan Chase & Co./ 2008 Annual Report
Note 18 – Goodwill and other intangible assets
Goodwill is not amortized. Instead, it is tested for impairment in
accordance with SFAS 142 at the reporting-unit segment, which is
generally one level below the six major reportable business segments
(as described in Note 37 on pages 226–227 of this Annual Report);
plus Private Equity (which is included in Corporate). Goodwill is test-
ed annually (during the fourth quarter) or more often if events or cir-
cumstances, such as adverse changes in the business climate, indi-
cate there may be impairment. Management applies significant judg-
ment when determining the fair value of its reporting units.
Imprecision in estimating the future earnings potential of the Firm’s
reporting units can affect their estimated fair value. In addition, if the
current period of weak economic market conditions persists, then
this could adversely impact the estimates management used to
determine the fair value of its reporting units. Intangible assets deter-
mined to have indefinite lives are not amortized but are tested for
impairment at least annually, or more frequently if events or changes
in circumstances indicate that the asset might be impaired. The
impairment test compares the fair value of the indefinite-lived intan-
gible asset to its carrying amount. Other acquired intangible assets
determined to have finite lives, such as core deposits and credit card
relationships, are amortized over their estimated useful lives in a
manner that best reflects the economic benefits of the intangible
asset; impairment testing is performed periodically on these amortiz-
ing intangible assets.
Consolidated VIEs
Assets
December 31,
2008 Trading debt Total
(in billions) and equity Loans Other(b) assets(c)
VIE program type
Municipal bond
vehicles $ 5.9 $ — $ 0.1 $ 6.0
Credit-linked notes 1.9 — 0.2 2.1
CDO warehouses(a) 0.2 — 0.1 0.3
Student loans — 4.0 0.1 4.1
Employee funds ——0.5 0.5
Energy investments ——0.4 0.4
Other 2.8 1.3 1.1 5.2
Total $10.8 $ 5.3 $ 2.5 $ 18.6
Liabilities
December 31,
2008 Beneficial interests Total
(in billions) in VIE Assets(d) Other(e) liabilities
VIE program type
Municipal bond
vehicles $ 5.5 $ 0.4 $ 5.9
Credit-linked notes 1.3 0.6 1.9
CDO warehouses ———
Student loans 2.8 1.1 3.9
Employee funds 0.1 — 0.1
Energy investments 0.2 — 0.2
Other 0.7 1.8 2.5
Total $ 10.6 $ 3.9 $ 14.5
Liabilities
December 31,
2007 Beneficial interests Total
(in billions) in VIE Assets(d) Other(e) liabilities
VIE program type
Municipal bond
vehicles $ 6.2 $ 0.6 $ 6.8
Credit-linked notes 2.3 0.5 2.8
CDO warehouses — — —
Student loans 4.1 — 4.1
Employee funds — — —
Energy investments — — —
Other 1.4 0.5 1.9
Total $ 14.0 $ 1.6 $ 15.6
Consolidated VIEs
Assets
December 31,
2007 Trading debt Total
(in billions) and equity Loans Other(b) assets(c)
VIE program type
Municipal bond
vehicles $ 6.8 $ — $ 0.1 $ 6.9
Credit-linked notes 2.3 — 0.2 2.5
CDO warehouses(a) 2.2 0.3 0.1 2.6
Student loans — 4.1 — 4.1
Employee funds — — — —
Energy investments — — — —
Other 3.0 — 0.5 3.5
Total $ 14.3 $ 4.4 $ 0.9 $ 19.6
Consolidated VIE assets and liabilities
The following table presents information on assets, liabilities and commitments related to VIEs that are consolidated by the Firm.
(a) Excluded from total assets was $1.9 billion of unfunded commitments at December 31, 2007. There were no unfunded commitments at December 31, 2008.
(b) Included assets classified as resale agreements and other assets within the Consolidated Balance Sheets.
(c) Assets of each consolidated VIE included in the program types above are generally used to satisfy the liabilities to third parties. The difference between total assets and total liabilities
recognized for consolidated VIEs represents the Firm’s interest in the consolidated VIEs for each program type.
(d) The interest-bearing beneficial interest liabilities issued by consolidated VIEs are classified in the line item titled, “Beneficial interests issued by consolidated variable interest entities”
on the Consolidated Balance Sheets. The holders of these beneficial interests do not have recourse to the general credit of JPMorgan Chase. Included in beneficial interests in VIE
assets are long-term beneficial interests of $5.0 billion and $7.2 billion at December 31, 2008 and 2007, respectively. See Note 23 on page 203 of this Annual Report for the maturity
profile of FIN 46 long-term beneficial interests.
(e) Included liabilities classified as other borrowed funds, long-term debt and other liabilities in the Consolidated Balance Sheets.