eTrade 2002 Annual Report Download - page 139

Table of Contents
Index to Financial Statements
Capitalized internally developed software costs were $34.0 million for fiscal 2002, $27.5 million for fiscal 2001, $20.1 million for the three
months ended December 31, 2000 and $61.5 million for fiscal 2000. Completed projects are transferred to property and equipment at cost and
are amortized on a straight-line basis over their estimated useful lives, generally four years. Amortization expense was $30.1 million for fiscal
2002, $28.5million for fiscal 2001, $5.7 million for the three months ended December 31, 2000 and $7.8 million for fiscal 2000. Included in
software, is $5.3 million of internally developed software in the process of development for which amortization has not begun.
On July 30, 1999, the Company entered into a lease agreement for its 164,500 square foot technology operation center located near Atlanta,
Georgia. To secure the lease, the Company had posted cash collateral, which was $71.9 million at December 31, 2001. On March 27, 2002, the
Company exercised its purchase option, and used the cash collateral to fund the purchase of the buildings and land. The $71.9 million purchase
is included in both buildings and land above.
9. OTHER ASSETS
Other assets consists of the following (in thousands):
December31,
2002 2001
Receivable for Bank securities sold, collateral not delivered (see below) $ 241,682 $ —
Net deferred tax assets (see Note 17) 112,224 165,501
Building deposit (see Note 8) — 71,888
Secured related party and employee notes receivable (see Note 11) 14,226 16,010
Other 178,949 138,731
Total other assets $ 547,081 $ 392,130
Receivable for Bank Securities Sold, Collateral Not Delivered
As part of its normal operations, the Bank enters into commitments to buy and sell mortgage-backed securities in order to manage certain
interest rate risk.
Receivable for Bank securities sold, collateral not delivered represents a receivable due from third party brokers for securities the Bank
committed to sell but did not deliver to the broker by the settlement date. The Bank was unable to deliver the securities primarily due to other
parties failing to deliver similar securities to the Bank, which the Bank had committed to buy (see Note 15). The Bank’ s interest rate risk
exposure related to this receivable is mitigated by its commitments to purchase securities from other third party brokers at a fixed price.
As of March 14, 2003, the Bank delivered $215.7 million or 89% of its original commitment to sell to the purchasers and subsequently received
full payment. The remaining balance due from brokers is $26.0 million, which the Company expects to receive in the normal course of business.
10. ASSET SECURITIZATION—COLLATERALIZED DEBT OBLIGATION
On September 27, 2002, ETGAM, a registered broker-dealer and investment advisor, transferred $50.2million of asset-backed securities to
E*TRADE ABS CDO I, Ltd (“CDO I”). In addition, a financial advisor purchased approximately $200 million of asset-backed securities on
behalf of CDO I and subsequently transferred those assets to CDO I. On September 27, 2002, CDO I sold beneficial interests in the form of
senior and subordinated notes and preference shares collateralized by CDO I’ s assets to investors for cash of $251.7million. Neither the
investors in beneficial interests sold by CDO I nor CDO I have recourse to ETGAM or the Company. Under SFAS No. 140, CDO I is not
required to be consolidated in the financial statements of the Company because CDO I is a qualifying special purpose entity, as defined in
SFAS No. 140. The Company
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2003. EDGAR Online, Inc.