TCF Bank 2015 Annual Report Download - page 77

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Leases which do not transfer substantially all benefits and risks of ownership to the lessee are classified as operating
leases. Such leased equipment and related initial direct costs are included in other assets on the Consolidated
Statements of Financial Condition and depreciated on a straight-line basis over the term of the lease to its estimated
salvage value. Depreciation expense is recorded as operating lease expense and included in non-interest expense.
Operating lease rental income is recognized when it is due and is reflected as a component of non-interest income.
An allowance for lease losses is not provided on operating leases.
Income Taxes Income taxes are accounted for using the asset and liability method. Under this method, deferred tax
assets and liabilities are recognized for the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax basis carrying amounts. Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recorded in income tax expense in the Consolidated Statements of Income in the
period in which the enactment date occurs. Also, if current period income tax rates change, the impact on the annual
effective income tax rate is applied year to date in the period of enactment.
The determination of current and deferred income taxes is a critical accounting estimate which is based on complex
analyses of many factors, including interpretation of income tax laws, the evaluation of uncertain tax positions,
differences between the tax and financial reporting bases of assets and liabilities (temporary differences), estimates
of amounts due or owed, the timing of reversals of temporary differences and current financial accounting standards.
Additionally, there can be no assurance that estimates and interpretations used in determining income tax liabilities
will not be challenged by taxing authorities. Actual results could differ significantly from the estimates and tax law
interpretations used in determining the current and deferred income tax liabilities.
In the preparation of income tax returns, tax positions are taken based on interpretation of income tax laws for which
the outcome is uncertain. Management periodically reviews and evaluates the status of uncertain tax positions and
makes estimates of amounts ultimately due or owed. The benefits of tax positions are recorded in income tax expense
in the Consolidated Statements of Income, net of the estimates of ultimate amounts due or owed, including any
applicable interest and penalties. Changes in the estimated amounts due or owed may result from closing of the
statute of limitations on tax returns, new legislation, clarification of existing legislation through government
pronouncements, judicial action and through the examination process. TCF's policy is to report interest and penalties,
if any, related to unrecognized tax benefits in income tax expense in the Consolidated Statements of Income.
Other Significant Accounting Policies
Investments Investments are carried at cost. TCF periodically evaluates investments for other than temporary
impairment with losses, if any, recorded in non-interest income within gains (losses) on securities, net.
Securities Held to Maturity Securities held to maturity are carried at cost and adjusted for amortization of premiums
or accretion of discounts using a level yield method; however, transfers of securities available for sale to securities
held to maturity are made at fair value at the date of transfer. The unrealized holding gain or loss at the date of each
transfer is retained in accumulated other comprehensive income (loss) and in the carrying value of the held to maturity
investment security. Such amounts are then amortized over the remaining life of the transferred security as an
adjustment of the yield on those securities. TCF periodically evaluates securities held to maturity for other than
temporary impairment. Declines in value considered other than temporary, if any, would be recorded in non-interest
income within gains (losses) on securities, net.
Securities Available for Sale Securities available for sale are carried at fair value with the unrealized gains or losses,
net of related deferred income taxes, reported within accumulated other comprehensive income (loss), a separate
component of equity. The cost of securities sold is determined on a specific identification basis and gains or losses on
sales of securities available for sale are recognized on trade dates. TCF evaluates securities available for sale for
other than temporary impairment on a quarterly basis. Declines in the value of securities available for sale that are
considered other than temporary are recorded in non-interest income within gains (losses) on securities, net. Discounts
and premiums on securities available for sale are amortized using a level yield method over the expected life of the
security, or to the call date for securities with call features.