Morgan Stanley 2014 Annual Report Download - page 302

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Transactions with Subsidiaries.
The Parent Company has transactions with its consolidated subsidiaries determined on an agreed-upon basis and
has guaranteed certain unsecured lines of credit and contractual obligations of certain of its consolidated
subsidiaries. Certain reclassifications have been made to prior-period amounts to conform to the current year’s
presentation.
Guarantees.
In the normal course of its business, the Parent Company guarantees certain of its subsidiaries’ obligations under
derivative and other financial arrangements. The Parent Company records Trading assets and Trading liabilities,
which include derivative contracts, at fair value on its condensed statements of financial condition.
The Parent Company also, in the normal course of its business, provides standard indemnities to counterparties
on behalf of its subsidiaries for taxes, including U.S. and foreign withholding taxes, on interest and other
payments made on derivatives, securities and stock lending transactions, and certain annuity products. These
indemnity payments could be required based on a change in the tax laws or change in interpretation of applicable
tax rulings. Certain contracts contain provisions that enable the Parent Company to terminate the agreement upon
the occurrence of such events. The maximum potential amount of future payments that the Parent Company
could be required to make under these indemnifications cannot be estimated. The Parent Company has not
recorded any contingent liability in its condensed financial statements for these indemnifications and believes
that the occurrence of any events that would trigger payments under these contracts is remote.
The Parent Company has issued guarantees on behalf of its subsidiaries to various U.S. and non-U.S. exchanges
and clearinghouses that trade and clear securities and/or futures contracts. Under these guarantee arrangements,
the Parent Company may be required to pay the financial obligations of its subsidiaries related to business
transacted on or with the exchanges and clearinghouses in the event of a subsidiary’s default on its obligations to
the exchange or the clearinghouse. The Parent Company has not recorded any contingent liability in its
condensed financial statements for these arrangements and believes that any potential requirements to make
payments under these arrangements are remote.
The Parent Company guarantees certain debt instruments and warrants issued by subsidiaries. The debt
instruments and warrants totaled $10.0 billion and $12.0 billion at December 31, 2014 and December 31, 2013,
respectively. In connection with subsidiary lease obligations, the Parent Company has issued guarantees to
various lessors. At December 31, 2014 and December 31, 2013, the Parent Company had $1.3 billion and $1.4
billion of guarantees outstanding, respectively, under subsidiary lease obligations, primarily in the U.K.
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