JP Morgan Chase 2010 Annual Report Download - page 186

Notes to consolidated financial statements
186 JPMorgan Chase & Co./2010 Annual Report
The following table presents the carrying value and estimated fair values of financial assets and liabilities.
20
10
2009
December 31, (in billions)
Carrying
value
Estimated
fair value
Appreciation/
(depreciation)
Carrying
value
Estimated
fair value
Appreciation/
(depreciation)
Financial assets
Assets for which fair value approximates carrying value
$
49.2
$
49.2
$
—
$ 89.4 $ 89.4 $ —
Accrued interest and accounts receivable (included
zero
and $5.0 at fair value) 70.1 70.1 — 67.4 67.4 —
Federal funds sold and securities purchased under resale
agreements (included $20.3 and $20.5 at fair value) 222.6 222.6 — 195.4 195.4 —
Securities borrowed (included
$
14.0
and $7.0 at fair value)
123.6
123.6
—
119.6 119.6 —
Trading assets
489.9
489.9
—
411.1 411.1 —
Securities (included
$
316.3
and $360.4 at fair value)
316.3
316.3
—
360.4 360.4 —
Loans (included $2.0 and $1.4 at fair value)
(a)
(b)
660.7 663.5 2.8 601.9 598.3 (3.6 )
Mortgage servicing rights at fair value
13.6
13.6
—
15.5 15.5 —
Other (included
$
18.2
and $19.2 at fair value)
64.9
65.0
0.1
73.4 73.2 (0.2 )
Total financial assets
$
2
,
010.9
$
2,01
3.8
$
2.9
$ 1,934.1 $ 1,930.3 $ (3.8 )
Financial liabilities
Deposits (included
$
4.4
and $4.5 at fair value)
$
930.4
$
931.5
$
(1.1)
$ 938.4 $ 939.5 $ (1.1 )
Federal funds purchased and securities loaned or sold
under repurchase agreements (included $4.1 and
$3.4 at fair value) 276.6 276.6 — 261.4 261.4 —
Commercial paper
35.4
35.4
—
41.8 41.8 —
Other borrowed funds (included
$
9.9
and $5.6 at fair
value) 57.3 57.2 0.1 55.7 55.9 (0.2
)
Trading liabilities
146.2
146.2
—
125.1 125.1 —
Accounts payable and other liabilities (included
$
0.2
and
$0.4 at fair value) 138.2 138.2 — 136.8 136.8 —
Beneficial interests issued by consolidated VIEs (included
$1.5 and $1.4 at fair value) 77.6 77.9 (0.3) 15.2 15.2 —
Long
-
term debt and junior subordinated deferrable inte
r
est
debentures (included $38.8 and $49.0 at fair value) 247.7 249.0 (1.3) 266.3 268.4 (2.1 )
Total financial liabilities
$
1,909.4
$
1,912.0
$
(2.6
)
$ 1,840.7 $ 1,844.1 $ (3.4 )
Net
appreciation/
(depreciation)
$
0.
3
$ (7.2 )
(a) For originated or purchased loans held for investment, other than PCI loans, the carrying value is the principal amount outstanding, net of the allowance for loan losses, net
charge-offs, interest applied to principal (for loans accounted for on the cost recovery method), unamortized discounts and premiums, and deferred loan fees or costs. For a
further discussion of the Firm’s loan accounting framework, see Note 14 on pages 220–238 of this Annual Report.
(b) Fair value is typically estimated using a discounted cash flow model that incorporates the characteristics of the underlying loans (including principal, contractual interest rate
and contractual fees) and key inputs, including expected lifetime credit losses, interest rates, prepayment rates, and primary origination or secondary market spreads. The dif-
ference between the estimated fair value and carrying value is the result of the different methodologies used to determine fair value as compared to carrying value. For
example, credit losses are estimated for the asset’s remaining life in a fair value calculation but are estimated for a loss emergence period in a loan loss reserve calcula-
tion; future loan income (interest and fees) is incorporated in a fair value calculation but is generally not considered in a loan loss reserve calculation. For a further dis-
cussion of the Firm’s methodologies for estimating the fair value of loans and lending-related commitments, see pages 171–173 of this Note.
The majority of the Firm’s unfunded lending-related commitments are not carried at fair value on a recurring basis on the Consolidated Balance
Sheets, nor are they actively traded. The carrying value and estimated fair value of the Firm’s wholesale lending-related commitments were as
follows for the periods indicated.
2010
2009
December 31, (in billions)
Carrying
value(a)
Estimated
fair value
Carrying
value(a)
Estimated
fair value
Wholesale lendi
ng-related commitments
$
0.7
$
0.9
$ 0.9 $ 1.3
(a) Represents the allowance for wholesale unfunded lending-related commitments. Excludes the current carrying values of the guarantee liability and the offsetting asset
each recognized at fair value at the inception of guarantees.
The Firm does not estimate the fair value of consumer lending-related commitments. In many cases, the Firm can reduce or cancel these com-
mitments by providing the borrower prior notice or, in some cases, without notice as permitted by law. For a further discussion of the valuation
of lending-related commitments, see pages 171–173 of this Note.