US Bank 2010 Annual Report Download - page 79

comprehensive income (loss) is reported in earnings
immediately.
REVENUE RECOGNITION
The Company recognizes revenue as it is earned based on
contractual terms, as transactions occur, or as services are
provided and collectibility is reasonably assured. In certain
circumstances, noninterest income is reported net of
associated expenses that are directly related to variable
volume-based sales or revenue sharing arrangements or
when the Company acts on an agency basis for others.
Certain specific policies include the following:
Credit and Debit Card Revenue Credit and debit card
revenue includes interchange income from credit and debit
cards, annual fees, and other transaction and account
management fees. Interchange income is a fee paid by a
merchant bank to the card-issuing bank through the
interchange network. Interchange fees are set by the credit
card companies and are based on cardholder purchase
volumes. The Company records interchange income as
transactions occur. Transaction and account management
fees are recognized as transactions occur or services are
provided, except for annual fees, which are recognized over
the applicable period. Volume-related payments to partners
and credit card companies and expenses for rewards
programs are also recorded within credit and debit card
revenue. Payments to partners and expenses related to
rewards programs are recorded when earned by the partner
or customer.
Merchant Processing Services Merchant processing services
revenue consists principally of transaction and account
management fees charged to merchants for the electronic
processing of transactions, net of interchange fees paid to
the credit card issuing bank, card company assessments, and
revenue sharing amounts, and is recognized at the time the
merchant’s transactions are processed or other services are
performed. The Company may enter into revenue sharing
agreements with referral partners or in connection with
purchases of merchant contracts from sellers. The revenue
sharing amounts are determined primarily on sales volume
processed or revenue generated for a particular group of
merchants. Merchant processing revenue also includes
revenues related to point-of-sale equipment recorded as sales
when the equipment is shipped or as earned for equipment
rentals.
Trust and Investment Management Fees Trust and
investment management fees are recognized over the period
in which services are performed and are based on a
percentage of the fair value of the assets under management
or administration, fixed based on account type, or
transaction-based fees.
Deposit Service Charges Service charges on deposit
accounts are primarily monthly fees based on minimum
balances or transaction-based fees. These fees are recognized
as earned or as transactions occur and services are provided.
OTHER SIGNIFICANT POLICIES
Intangible Assets The price paid over the net fair value of
acquired businesses (“goodwill”) is not amortized. Other
intangible assets are amortized over their estimated useful
lives, using straight-line and accelerated methods. The
recoverability of goodwill and other intangible assets is
evaluated annually, at a minimum, or on an interim basis if
events or circumstances indicate a possible inability to
realize the carrying amount. The evaluation includes
assessing the estimated fair value of the intangible asset
based on market prices for similar assets, where available,
and the present value of the estimated future cash flows
associated with the intangible asset.
Income Taxes Deferred taxes are recorded to reflect the tax
consequences on future years of differences between the tax
basis of assets and liabilities and their financial reporting
carrying amounts.
Mortgage Servicing Rights Mortgage servicing rights
(“MSRs”) are capitalized as separate assets when loans are
sold and servicing is retained or if they are purchased from
others. MSRs are recorded at fair value. The Company
determines the fair value by estimating the present value of
the asset’s future cash flows utilizing market-based
prepayment rates, discount rates, and other assumptions
validated through comparison to trade information, industry
surveys and independent third-party valuations. Changes in
the fair value of MSRs are recorded in earnings during the
period in which they occur. Risks inherent in the MSRs
valuation include higher than expected prepayment rates
and/or delayed receipt of cash flows. The Company utilizes
futures, forwards and options to mitigate MSR valuation
risk. Fair value changes related to the MSRs and the futures,
forwards and options, as well as servicing and other related
fees, are recorded in mortgage banking revenue.
Pensions For purposes of its retirement plans, the Company
utilizes its fiscal year-end as the measurement date. At the
measurement date, plan assets are determined based on fair
value, generally representing observable market prices. The
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