KeyBank 2015 Annual Report Download - page 141

“Other securities” held in the held-to-maturity portfolio consist of foreign bonds and capital securities.
Other-than-Temporary Impairments
If the amortized cost of a debt security is greater than its fair value and we intend to sell it, or it is more-likely-
than-not that we will be required to sell it, before the expected recovery of the amortized cost, then the entire
impairment is recognized in earnings. If we have no intent to sell the security, or it is more-likely-than-not that
we will not be required to sell it, before expected recovery, then the credit portion of the impairment is
recognized in earnings, while the remaining portion attributable to factors such as liquidity and interest rate
changes is recognized in equity as a component of AOCI on the balance sheet. The credit portion is equal to the
difference between the cash flows expected to be collected and the amortized cost of the debt security.
Generally, if the amortized cost of an equity security is greater than its fair value by more than 20% consistently
for more than six months, the difference is considered to be other-than-temporary.
Other Investments
Principal investments — investments in equity and debt instruments made by our Principal Investing unit —
represented 46% and 53% of other investments at December 31, 2015, and December 31, 2014, respectively, and
included both direct investments (investments made in a particular company) and indirect investments
(investments made through funds that include other investors). Principal investments are predominantly made in
privately held companies and are carried at fair value ($304 million at December 31, 2015, and $406 million at
December 31, 2014). Changes in fair values and realized gains and losses on sales of principal investments are
reported as “net gains (losses) from principal investing” on the income statement.
In addition to principal investments, “other investments” include other equity and mezzanine instruments, such as
certain real estate-related investments that are carried at fair value, as well as other types of investments that
generally are carried at cost. The carrying amounts of the investments carried at cost are adjusted for declines in
value if they are considered to be other-than-temporary. These adjustments are included in “other income” on the
income statement.
Repurchase agreements
We enter into repurchase and reverse repurchase agreements primarily to acquire securities to cover short
positions, to finance our investing positions, and to settle other securities obligations. Repurchase and reverse
repurchase agreements are accounted for as collateralized financing transactions and recorded on our balance
sheet at the amounts at which the securities will be subsequently sold or repurchased. The value of our
repurchase and reverse repurchase agreements is based on the valuation of the underlying securities, as further
described under the “Other assets and liabilities” heading in Note 6 (“Fair Value Measurements”). Fees received
in connection with these transactions are recorded in interest income; fees paid are recorded in interest expense.
Derivatives
In accordance with applicable accounting guidance, all derivatives are recognized as either assets or liabilities on
the balance sheet at fair value. The net increase or decrease in derivatives is included in “other operating
activities, net” within the statement of cash flows.
Accounting for changes in fair value (i.e., gains or losses) of derivatives differs depending on whether the
derivative has been designated and qualifies as part of a hedge relationship, and further, on the type of hedge
relationship. For derivatives that are not designated as hedging instruments, any gain or loss is recognized
immediately in earnings. A derivative that is designated and qualifies as a hedging instrument must be designated
as a fair value hedge, a cash flow hedge, or a hedge of a net investment in a foreign operation.
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