JP Morgan Chase 2008 Annual Report Download - page 232

Glossary of terms
ACH: Automated Clearing House.
Advised lines of credit: An authorization which specifies the max-
imum amount of a credit facility the Firm has made available to an
obligor on a revolving but non-binding basis. The borrower receives
written or oral advice of this facility. The Firm may cancel this facility
at any time.
AICPA: American Institute of Certified Public Accountants.
AICPA Statement of Position (“SOP”) 03-3: “Accounting for
Certain Loans or Debt Securities Acquired in a Transfer.”
AICPA SOP 07-1: “Clarification of the Scope of the Audit and
Accounting Guide Investment Companies and Accounting by Parent
Companies and Equity Method Investors for Investments in
Investment Companies.”
AICPA SOP 98-1: “Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use.”
Alternative assets: The following types of assets constitute alterna-
tive investments – hedge funds, currency, real estate and private equity.
APB 18: Accounting Principles Board Opinion No. 18, “The Equity
Method of Accounting for Investments in Common Stock.”
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, Retail, Private
Banking, Private Wealth Management and Bear Stearns Brokerage
clients. Excludes assets managed by American Century Companies,
Inc., in which the Firm has a 43% ownership interest as of December
31, 2008.
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
Consolidated Balance Sheets 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 obligations 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.
Combined effective loan-to-value ratio: For residential real
estate loans, an indicator of how much equity a borrower has in a
secured borrowing based on current estimates of the value of the
collateral and considering all lien positions related to the property.
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 notifi-
cation of the filing of bankruptcy, whichever is earlier.
Credit card securitizations: Card Services’ managed results
excludes the impact of credit card securitizations on total net revenue,
the provision for credit losses, net charge-offs and loan receivables.
Through securitization, the Firm transforms a portion of its credit card
receivables into securities, which are sold to investors. The credit card
receivables are removed from the Consolidated Balance Sheets
through the transfer of the receivables to a trust, and through the sale
of undivided interests to investors that entitle the investors to specific
cash flows generated from the credit card receivables. The Firm retains
the remaining undivided interests as seller’s interests, which are
recorded in loans on the Consolidated Balance Sheets. A gain or loss
on the sale of credit card receivables to investors is recorded in other
income. Securitization also affects the Firm’s Consolidated Statements
of Income, as the aggregate amount of interest income, certain fee
revenue and recoveries that is in excess of the aggregate amount of
interest paid to investors, gross credit losses and other trust expense
related to the securitized receivables are reclassified into credit card
income in the Consolidated Statements of Income.
Credit derivatives: Contractual agreements that provide protection
against a credit event on one or more referenced credits. The nature
of a credit event is established by the protection buyer and protec-
tion 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 couple of years to several years.
Deposit margin: Represents net interest income on deposits
expressed as a percentage of average deposits.
Discontinued operations: A component of an entity that is classi-
fied as held-for-sale or that has been disposed of from ongoing oper-
ations in its entirety or piecemeal, and for which the entity will not
have any significant, continuing involvement. A discontinued opera-
tion may be a separate major business segment, a component of a
major business segment or a geographical area of operations of the
entity that can be separately distinguished operationally and for
financial reporting purposes.
EITF: Emerging Issues Task Force.
EITF Issue 06-11: “Accounting for Income Tax Benefits of Dividends
on Share-Based Payment Awards.”
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.”
230 JPMorgan Chase & Co./ 2008 Annual Report