eTrade 2005 Annual Report Download - page 125

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that focused primarily upon the application of EITF 03-01 to debt securities that are impaired solely due to interest rates and/or sector
spreads. In November 2005, the FASB issued FSP 115-1/124-1,
The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments
, which nullified and replaced the qualitative and quantitative guidance for determining whether
securities are other-than-temporarily impaired. The new guidance is consistent with the Company’s current practice which is primarily
found within SFAS No.115 and EITF 99-20, as to the measurement and recognition of other-than-temporary impairments of its debt and
equity securities.
SFAS No.154—Accounting Changes and Error Corrections
In June 2005, the FASB issued SFAS No.154,
Accounting Changes and Error Corrections
. This statement supersedes APB Opinion
No.20,
Accounting Changes
and SFAS No.3,
Reporting Accounting Changes in Interim Financial Statements
. The statement applies
to all voluntary changes in accounting principle and changes the requirements for accounting and reporting of a change in accounting
principle. SFAS No.154 requires retrospective application to prior periods’ financial statements of a voluntary change in accounting
principle unless it is impracticable. The statement requires that a change in method of depreciation, amortization, or depletion for
long-lived, nonfinancial assets be accounted for as a change in accounting estimate that is effected by a change in accounting
principle. SFAS No.154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December15,
2005. The statement does not change the transition provisions of any existing accounting pronouncements, including those that are in
a transition phase as of the effective date of this statement. The Company will adopt SFAS No.154, as applicable, beginning in 2006.
SOP No.03-3—Accounting for Certain Loans or Debt Securities Acquired in a Transfer
In December2003, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued
SOP No.03-3,
Accounting for Certain Loans or Debt Securities Acquired in a Transfer
to address accounting for differences between
the contractual cash flows of certain loans and debt securities and the cash flows expected to be collected when loans or debt
securities are acquired in a transfer and those cash flow differences are attributable, at least in part, to credit quality. As such, SOP
No.03-3 applies to loans and debt securities purchased or acquired in purchase business combinations and does not apply to
originated loans. SOP No.03-3 requires that the excess of contractual cash flows over cash flows expected to be collected
(nonaccretable difference) not be recognized as an adjustment of yield or valuation allowance, such as the allowance for credit losses.
Subsequent to the initial investment, increases in expected cash flows generally should be recognized prospectively through
adjustment of the yield on the loan or debt security over its remaining life. Decreases in expected cash flows should be recognized as
impairment. SOP No.03-3 is effective for loans and debt securities acquired in fiscal years beginning after December15, 2004, with early
application encouraged. In 2005, the Company adopted this new pronouncement, which effect was not material to the Company’s
financial condition, result of operations or cash flows.
NOTE 2—BUSINESS COMBINATIONS
Over the past two years, the Company completed several business combinations and asset acquisitions which were all accounted for
under the purchase method of accounting. The purchase prices have been allocated to the net assets acquired and the liabilities
assumed based on their estimated fair values at the date of acquisition. For certain acquisitions, the consolidated financial statements
reflect preliminary allocations of purchase price, as appraisals of the net assets acquired have not been finalized. The Company does
not expect changes in the preliminary allocations from the finalization of these appraisals to be material to its consolidated statements
of income. The results of operations of each are included in the Company’s consolidated statements of income from the date of each
acquisition.
BrownCo
On November30, 2005, the Company completed its acquisition of J.P. Morgan Invest, LLC (“BrownCo”), an online discount brokerage
business with approximately 186,000 customer accounts, from JP Morgan Chase&
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2006. EDGAR Online, Inc.