US Bank 2009 Annual Report Download - page 82

securities, but the effect was not significant. For additional
information on the fair value of certain financial assets and
liabilities, refer to Note 21.
Other-Than-Temporary-Impairments On April 9, 2009, the
FASB issued new accounting guidance, which the Company
adopted effective January 1, 2009, for the measurement and
recognition of other-than-temporary impairment for debt
securities. If an entity does not intend to sell, and it is more
likely than not that the entity will not be required to sell, a
debt security before recovery of its cost basis,
other-than-temporary impairment should be separated into
(a) the amount representing credit loss and (b) the amount
related to all other factors. The amount of
other-than-temporary impairment related to credit loss is
recognized in earnings and other-than-temporary impairment
related to other factors is recognized in other comprehensive
income (loss). To determine the amount related to credit
loss, the Company applies a methodology similar to that
used for accounting by creditors for impairment of loans.
The Company’s adoption of this guidance resulted in the
recognition of a cumulative-effect adjustment to increase
January 1, 2009 retained earnings, with a corresponding
adjustment to accumulated other comprehensive income
(loss), of $141 million. For additional information on
investment securities, refer to Note 5.
Business Combinations Effective January 1, 2009, the
Company adopted accounting guidance issued by the FASB
which established principles and requirements for the
acquirer in a business combination, including the recognition
and measurement of the identifiable assets acquired, the
liabilities assumed and any noncontrolling interest in the
acquired entity as of the acquisition date; the recognition
and measurement of the goodwill acquired in the business
combination or gain from a bargain purchase as of the
acquisition date; and additional disclosures related to the
nature and financial effects of the business combination.
Under this guidance, nearly all acquired assets and liabilities
assumed are recorded at fair value at the acquisition date,
including loans. The recognition at the acquisition date of an
allowance for loan losses on acquired loans was eliminated,
as credit-related factors are now incorporated directly into
the fair value of the loans. Other significant changes include
recognizing transaction costs and most restructuring costs as
expenses when incurred. These accounting requirements are
applied on a prospective basis for all transactions completed
after the effective date.
Noncontrolling Interests Effective January 1, 2009, the
Company adopted accounting guidance issued by the FASB
which changes the accounting and reporting for third-party
ownership interests in the Company’s consolidated
subsidiaries. Under the new guidance, these interests are
characterized as noncontrolling interests and classified as a
component of equity, separate from U.S. Bancorp’s own
equity. In addition, the amount of net income attributable to
the entity and to the noncontrolling interests is required to
be shown separately on the consolidated statement of
income. Upon adoption of this guidance, the Company
reclassified $733 million in noncontrolling interests from
other liabilities to equity and reclassified noncontrolling
interests’ share of net income from other noninterest expense
to income attributable to noncontrolling interests.
Accounting for Transfers of Financial Assets In June 2009,
the FASB issued accounting guidance, effective for the
Company January 1, 2010, related to the transfer of
financial assets. This guidance removes the exception for
qualifying special-purpose entities from consolidation
guidance and the exception for guaranteed mortgage
securitizations when a transferor had not surrendered
control over the transferred financial assets. In addition, the
guidance provided clarification of the requirements for
isolation and limitations on portions of financial assets that
are eligible for sale accounting. The guidance also requires
additional disclosure about transfers of financial assets and a
transferor’s continuing involvement with transferred assets.
The Company expects the adoption of this guidance will not
be significant to its financial statements.
Variable Interest Entities In June 2009, the FASB issued
accounting guidance, effective for the Company on
January 1, 2010, related to variable interest entities. This
guidance replaces a quantitative-based risks and rewards
calculation for determining which entity, if any, has both
(a) a controlling financial interest in a variable interest entity
with an approach focused on identifying which entity has
the power to direct the activities of a variable interest entity
that most significantly impact the entity’s economic
performance and (b) the obligation to absorb losses of the
entity or the right to receive benefits from the entity that
could potentially be significant to the variable interest entity.
This guidance requires reconsideration of whether an entity
is a variable interest entity when any changes in facts or
circumstances occur such that the holders of the equity
investment at risk, as a group, lose the power to direct the
activities of the entity that most significantly impact the
entity’s economic performance. It also requires ongoing
assessments of whether a variable interest holder is the
primary beneficiary of a variable interest entity. The
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