JP Morgan Chase 2015 Annual Report Download - page 193

JPMorgan Chase & Co./2015 Annual Report 183
Typical master netting agreements for these types of
transactions also often contain a collateral/margin
agreement that provides for a security interest in, or title
transfer of, securities or cash collateral/margin to the party
that has the right to demand margin (the “demanding
party”). The collateral/margin agreement typically requires
a party to transfer collateral/margin to the demanding
party with a value equal to the amount of the margin deficit
on a net basis across all transactions governed by the
master netting agreement, less any threshold. The
collateral/margin agreement grants to the demanding
party, upon default by the counterparty, the right to set-off
any amounts payable by the counterparty against any
posted collateral or the cash equivalent of any posted
collateral/margin. It also grants to the demanding party the
right to liquidate collateral/margin and to apply the
proceeds to an amount payable by the counterparty.
For further discussion of the Firm’s derivative instruments,
see Note 6. For further discussion of the Firm’s repurchase
and reverse repurchase agreements, and securities
borrowing and lending agreements, see Note 13.
Simplifying the presentation of debt issuance costs
Effective October 1, 2015, the Firm early adopted new
accounting guidance that simplifies the presentation of debt
issuance costs, by requiring that unamortized debt issuance
costs be presented as a reduction of the applicable liability
rather than as an asset. The adoption of this guidance had
no material impact on the Firm’s Consolidated balance
sheets, and no impact on the Firm’s consolidated results of
operations. The guidance was required to be applied
retrospectively, and accordingly, certain prior period
amounts have been revised to conform with the current
period presentation.
Investments in qualified affordable housing projects
Effective January 1, 2015, the Firm adopted new
accounting guidance for investments in affordable housing
projects that qualify for the low-income housing tax credit,
which impacted the Corporate & Investment Bank (“CIB”).
As a result of the adoption of this new guidance, the Firm
made an accounting policy election to amortize the initial
cost of its qualifying investments in proportion to the tax
credits and other benefits received, and to present the
amortization as a component of income tax expense;
previously such amounts were predominantly presented in
other income. The guidance was required to be applied
retrospectively, and accordingly, certain prior period
amounts have been revised to conform with the current
period presentation. The cumulative effect on retained
earnings was a reduction of $284 million as of January 1,
2013. The adoption of this accounting guidance resulted in
an increase of $907 million and $924 million in other
income and income tax expense, respectively, for the year
ended December 31, 2014 and $761 million and $798
million, respectively, for the year ended December 2013,
which led to an increase of approximately 2% in the
effective tax rate for the year ended December 31, 2014
and 2013. The impact on net income and earnings per
share in the periods affected was not material. For further
information, see Note 26.
Statements of cash flows
For JPMorgan Chase’s Consolidated statements of cash
flows, cash is defined as those amounts included in cash
and due from banks.
Significant accounting policies
The following table identifies JPMorgan Chase’s other
significant accounting policies and the Note and page where
a detailed description of each policy can be found.
Fair value measurement Note 3 Page 184
Fair value option Note 4 Page 203
Derivative instruments Note 6 Page 208
Noninterest revenue Note 7 Page 221
Interest income and interest expense Note 8 Page 223
Pension and other postretirement
employee benefit plans Note 9 Page 223
Employee stock-based incentives Note 10 Page 231
Securities Note 12 Page 233
Securities financing activities Note 13 Page 238
Loans Note 14 Page 242
Allowance for credit losses Note 15 Page 262
Variable interest entities Note 16 Page 266
Goodwill and other intangible assets Note 17 Page 274
Premises and equipment Note 18 Page 278
Long-term debt Note 21 Page 279
Income taxes Note 26 Page 285
Off–balance sheet lending-related
financial instruments, guarantees and
other commitments Note 29 Page 290
Litigation Note 31 Page 297
Note 2 – Business changes and developments
Private Equity sale
As part of the Firm’s business simplification agenda, the
sale of a portion of the Private Equity Business (“Private
Equity sale”) was completed on January 9, 2015.
Concurrent with the sale, a new independent management
company was formed by the former One Equity Partners
investment professionals. The new management company
provides investment management services to the acquirer
of the investments sold in the Private Equity sale and to the
Firm for the portion of the private equity investments that
were retained by the Firm. The sale of the investments did
not have a material impact on the Firm’s Consolidated
balance sheets or its results of operations.