US Bank 2005 Annual Report Download - page 116

activities, including lending practices, corporate governance the Financial Accounting Standards Board (FASB) changes
and acquisitions, and actions taken by government the financial accounting and reporting standards that govern
regulators and community organizations in response to the preparation of the Company’s financial statements.
those activities. Negative publicity can adversely affect the These changes can be hard to predict and can materially
Company’s ability to keep and attract customers and can impact how the Company records and reports its financial
expose the Company to litigation and regulatory action. condition and results of operations. In some cases, the
Because most of the Company’s businesses operate under Company could be required to apply a new or revised
the ‘‘U.S. Bank’’ brand, actual or alleged conduct by one standard retroactively, resulting in the Company’s restating
business can result in negative publicity about other prior period financial statements.
businesses the Company operates. Although the Company Acquisitions may not produce revenue enhancements or
takes steps to minimize reputation risk in dealing with cost savings at levels or within timeframes originally
customers and other constituencies, the Company, as a large anticipated and may result in unforeseen integration
diversified financial services company with a high industry difficulties. The Company regularly explores opportunities
profile, is inherently exposed to this risk. to acquire financial services businesses or assets and may
The Company’s reported financial results depend on also consider opportunities to acquire other banks or
management’s selection of accounting methods and financial institutions. The Company cannot predict the
certain assumptions and estimates. The Company’s number, size or timing of acquisitions.
accounting policies and methods are fundamental to how Difficulty in integrating an acquired business or
the Company records and reports its financial condition and company may cause the Company not to realize expected
results of operations. The Company’s management must revenue increases, cost savings, increases in geographic or
exercise judgment in selecting and applying many of these product presence, and/or other projected benefits from the
accounting policies and methods so they comply with acquisition. The integration could result in higher than
GAAP and reflect management’s judgment of the most expected deposit attrition (run-off), loss of key employees,
appropriate manner to report the Company’s financial disruption of the Company’s business or the business of the
condition and results. In some cases, management must acquired company, or otherwise adversely affect the
select the accounting policy or method to apply from two Company’s ability to maintain relationships with customers
or more alternatives, any of which might be reasonable and employees or achieve the anticipated benefits of the
under the circumstances yet might result in the Company’s acquisition. Also, the negative effect of any divestitures
reporting materially different results than would have been required by regulatory authorities in acquisitions or business
reported under a different alternative. combinations may be greater than expected.
Certain accounting policies are critical to presenting the The Company must generally receive federal regulatory
Company’s financial condition and results. They require approval before it can acquire a bank or bank holding
management to make difficult, subjective or complex company. In determining whether to approve a proposed
judgments about matters that are uncertain. Materially bank acquisition, federal bank regulators will consider,
different amounts could be reported under different among other factors, the effect of the acquisition on the
conditions or using different assumptions or estimates. competition, financial condition, and future prospects. The
These critical accounting policies include: the allowance for regulators also review current and projected capital ratios
credit losses; the valuation of mortgage servicing rights; the and levels, the competence, experience, and integrity of
valuation of goodwill and other intangible assets; and management and its record of compliance with laws and
income taxes. Because of the uncertainty of estimates regulations, the convenience and needs of the communities
involved in these matters, the Company may be required to to be served (including the acquiring institution’s record of
do one or more of the following: significantly increase the compliance under the Community Reinvestment Act) and
allowance for credit losses and/or sustain credit losses that the effectiveness of the acquiring institution in combating
are significantly higher than the reserve provided; recognize money laundering activities. In addition, the Company
significant provision for impairment of its mortgage cannot be certain when or if, or on what terms and
servicing rights; recognize significant impairment on its conditions, any required regulatory approvals will be
goodwill and other intangible asset balances; or significantly granted. The Company may be required to sell banks or
increase its accrued taxes liability. branches as a condition to receiving regulatory approval.
For more information, refer to ‘‘Critical Accounting If new laws were enacted that restrict the ability of the
Policies’’ in this Annual Report and Form 10-K. Company and its subsidiaries to share information about
Changes in accounting standards could materially impact customers, the Company’s financial results could be
the Company’s financial statements. From time to time, negatively affected. The Company’s business model
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