Morgan Stanley 2014 Annual Report Download - page 78

Brokerage, clearing and exchange expenses increased 16% in 2013 compared with 2012 primarily due to higher
volumes of activity. Information processing and communications expenses decreased 9% in 2013 compared with
2012 primarily due to lower technology costs. Professional services expenses increased 5% in 2013 compared with
2012 primarily due to higher consulting expenses related to the Company’s technology platform.
Income Tax Items.
In 2014, the Company recognized in Provision for (benefit from) income taxes an aggregate discrete net tax
benefit of $839 million attributable to its Institutional Securities business segment. This included discrete tax
benefits of: $612 million principally associated with remeasurement of reserves and related interest due to new
information regarding the status of a multi-year tax authority examination, and $237 million primarily associated
with the repatriation of non-U.S. earnings at a cost lower than originally estimated. In addition, the Company’s
Provision for (benefit from) income taxes for the business segment was impacted by approximately $900 million
of tax provision as a result of non-deductible expenses related to litigation and regulatory matters.
In 2013, the Company recognized in Provision for (benefit from) income taxes an aggregate discrete net tax
benefit of $407 million attributable to its Institutional Securities business segment. This included discrete tax
benefits of: $161 million related to the remeasurement of reserves and related interest associated with new
information regarding the status of certain tax authority examinations; $92 million related to the establishment of
a previously unrecognized deferred tax asset from a legal entity reorganization; $73 million that is attributable to
tax planning strategies to optimize foreign tax credit utilization as a result of the anticipated repatriation of
earnings from certain non-U.S. subsidiaries; and $81 million due to the retroactive effective date of the American
Taxpayer Relief Act of 2012 (the “Relief Act”). For a further discussion of the Relief Act, see “Other Matters—
Income Tax Matters” herein.
In 2012, the Company recognized in Provision for (benefit from) income taxes a net tax benefit of $249 million
attributable to its Institutional Securities business segment. This included a discrete tax benefit of $299 million
related to the remeasurement of reserves and related interest associated with either the expiration of the
applicable statute of limitations or new information regarding the status of certain Internal Revenue Service
examinations and an out-of-period net tax provision of $50 million, primarily related to the overstatement of
deferred tax assets associated with repatriated earnings of foreign subsidiaries recorded in prior years. The
Company has evaluated the effects of the understatement of the income tax provision both qualitatively and
quantitatively, and concluded that it did not have a material impact on any prior annual or quarterly consolidated
financial statements.
Discontinued Operations.
For a discussion about discontinued operations, see Note 1 to the Company’s consolidated financial statements in
Item 8.
Nonredeemable Noncontrolling Interests.
Nonredeemable noncontrolling interests primarily relate to Mitsubishi UFJ Financial Group, Inc.’s (“MUFG”)
interest in Morgan Stanley MUFG Securities Co., Ltd. (see Note 22 to the Company’s consolidated financial
statements in Item 8).
Global Oil Merchanting Business, CanTerm and TransMontaigne.
On December 20, 2013, the Company and a subsidiary of Rosneft Oil Company (“Rosneft”) entered into a
Purchase Agreement pursuant to which the Company would sell the global oil merchanting unit of its
commodities division (the “global oil merchanting business”) to Rosneft. On December 22, 2014, the Company
announced the termination of the sale due to the expiration of the Purchase Agreement on December 20, 2014.
The Company continues to explore strategic options for its global oil merchanting business.
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