US Bank 2003 Annual Report Download - page 73

Company elected not to reissue more than 90 percent of the Guarantees In November 2002, the Financial Accounting
commercial paper funding of Stellar Funding Group, Inc., Standards Board issued Interpretation No. 45 (‘‘FIN 45’’),
the commercial loan conduit. This action caused the conduit ‘‘Guarantor’s Accounting and Disclosure Requirements for
to lose its status as a qualifying special purpose entity. As a Guarantees, Including Indirect Guarantees of Indebtedness
result, the Company recorded all of Stellar’s assets and of Others,’’ to clarify accounting and disclosure
liabilities at fair value and the results of operations in the requirements relating to a guarantor’s issuance of certain
consolidated financial statements of the Company. Given types of guarantees. FIN 45 requires entities to disclose
the floating rate nature and high credit quality of the assets additional information about certain guarantees, or group
within the conduit, the net impact to the Company’s of similar guarantees, even if the likelihood of the
financial statements was not significant. Prior to guarantor’s having to make any payments under the
December 31, 2003, the remaining commercial paper guarantee is remote. The disclosure provisions are effective
borrowings held by third-party investors matured and the for interim and annual financial statements for the first
conduit was legally dissolved. reporting period ending after December 15, 2002. For
With respect to other interests in entities subject to FIN certain guarantees, the interpretation also requires that
46, including low-income housing investments, the adoption guarantors recognize a liability equal to the fair value of the
of FIN 46 did not have a material impact on the guarantee upon its issuance. The Company adopted the
Company’s financial statements. The Company has initial recognition and measurement provision effective
determined that the provisions of FIN 46 may require de- January 1, 2003, which did not have a material impact on
consolidation of the subsidiary grantor trusts, which issue the Company’s financial statements.
mandatorily redeemable preferred securities (‘‘Trust Business Combinations and Goodwill and Other Intangible
Preferred Securities’’). Currently, the Company consolidates Assets In June 2001, the Financial Accounting Standards
the grantor trusts and the balance sheet includes the Board issued Statement of Financial Accounting Standards
mandatorily redeemable preferred securities of the grantor No. 141 (‘‘SFAS 141’’), ‘‘Business Combinations,’’ and
trusts. In the first quarter of 2004, the grantor trusts may Statement of Financial Accounting Standards No. 142
be de-consolidated and the junior subordinated debentures (‘‘SFAS 142’’), ‘‘Goodwill and Other Intangible Assets.’’
of the Company owned by the grantor trusts would be SFAS 141 mandates that the purchase method of accounting
recorded. The Trust Preferred Securities currently qualify as be used for all business combinations initiated after
Tier 1 capital of the Company for regulatory capital June 30, 2001, and established specific criteria for the
purposes. The banking regulatory agencies have issued recognition of intangible assets separately from goodwill.
guidance that would continue the current regulatory capital SFAS 142 addresses the accounting for goodwill and
treatment for Trust Preferred Securities until further notice. intangible assets subsequent to their acquisition. The
Stock-Based Compensation In December 2002, the Company adopted SFAS 142 on January 1, 2002. The most
Financial Accounting Standards Board issued Statement of significant changes made by SFAS 142 are that goodwill and
Financial Accounting Standards No. 148 (‘‘SFAS 148’’), indefinite lived intangible assets are no longer amortized
‘‘Accounting for Stock-Based Compensation — Transition and are to be tested for impairment at least annually. The
and Disclosure,’’ an amendment of SFAS 123. SFAS 148 amortization provisions of SFAS 142 apply to goodwill and
provides alternative methods of transition for a voluntary intangible assets acquired after June 30, 2001. With respect
change to the fair value based method of accounting for to goodwill and intangible assets acquired prior to July 1,
stock-based employee compensation. In previous years, the 2001, the amortization provisions of SFAS 142 were
Company accounted for stock-based employee effective upon adoption of SFAS 142.
compensation under the intrinsic based method and Applying the provisions of SFAS 141 to recent
provided disclosure of the impact of the fair value based acquisitions and the provisions of SFAS 142 to purchase
method on reported income. For its 2003 financial acquisitions completed prior to July 1, 2001, increased
statements, the Company elected to adopt the fair value after-tax income for the year ended December 31, 2002, by
method using the retroactive restatement approach. All $205.6 million, or $.11 per diluted share. During the first
prior periods presented have been restated to reflect the quarter of 2002, the Company completed its initial
compensation cost that would have been recognized had the impairment test as required by SFAS 142. As a result of this
recognition provisions of SFAS 123 been applied to all initial impairment test, the Company recognized an after-tax
awards granted to employees after January 1, 1995 that goodwill impairment charge of $37.2 million as a
remained unvested at the beginning of the first period ‘‘cumulative effect of accounting change’’ in the income
presented. statement in the first quarter of 2002. The impairment was
primarily related to the purchase of a transportation leasing
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