JP Morgan Chase 2012 Annual Report Download - page 68

Management’s discussion and analysis
78 JPMorgan Chase & Co./2012 Annual Report
BUSINESS SEGMENT RESULTS
The Firm is managed on a line of business basis. There are
four major reportable business segments – Consumer &
Community Banking, Corporate & Investment Bank,
Commercial Banking and Asset Management. In addition,
there is a Corporate/Private Equity segment.
The business segments are determined based on the
products and services provided, or the type of customer
served, and they reflect the manner in which financial
information is currently evaluated by management. Results
of these lines of business are presented on a managed
basis. For a definition of managed basis, see Explanation
and Reconciliation of the Firm’s use of non-GAAP financial
measures, on pages 76–77 of this Annual Report.
Business segment changes
Commencing with the fourth quarter of 2012, the Firm's
business segments have been reorganized as follows:
Retail Financial Services and Card Services & Auto (“Card”)
business segments were combined to form one business
segment called Consumer & Community Banking (“CCB”),
and Investment Bank and Treasury & Securities Services
business segments were combined to form one business
segment called Corporate & Investment Bank (“CIB”).
Commercial Banking (“CB”) and Asset Management (“AM”)
were not affected by the aforementioned changes. A
technology function supporting online and mobile banking
was transferred from Corporate/Private Equity to the CCB
business segment. This transfer did not materially affect the
results of either the CCB business segment or Corporate/
Private Equity.
The business segment information that follows has been
revised to reflect the business reorganization retroactive to
January 1, 2010.
Description of business segment reporting methodology
Results of the business segments are intended to reflect
each segment as if it were essentially a stand-alone
business. The management reporting process that derives
business segment results allocates income and expense
using market-based methodologies. The Firm continues to
assess the assumptions, methodologies and reporting
classifications used for segment reporting, and further
refinements may be implemented in future periods.
Revenue sharing
When business segments join efforts to sell products and
services to the Firm’s clients, the participating business
segments agree to share revenue from those transactions.
The segment results reflect these revenue-sharing
agreements.
Funds transfer pricing
Funds transfer pricing is used to allocate interest income
and expense to each business and transfer the primary
interest rate risk exposures to the Treasury group within
Corporate/Private Equity. The allocation process is unique
to each business segment and considers the interest rate
risk, liquidity risk and regulatory requirements of that
segment as if it were operating independently, and as
compared with its stand-alone peers. This process is
overseen by senior management and reviewed by the Firm’s
Asset-Liability Committee (“ALCO”). Business segments may
be permitted to retain certain interest rate exposures
subject to management approval.