eTrade 2006 Annual Report Download - page 93

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recognized when the related loans are sold. Gains or losses resulting from the sale of available-for-sale securities
are recognized at the trade date, based on the difference between the anticipated proceeds and the amortized cost
of the specific securities sold.
Other Revenue—Other revenue consists of stock plan administration services, payments for order flow from
third party market makers and foreign exchange margin revenue. Stock plan administration services are
recognized in accordance with applicable accounting guidance, including SOP 97-2, Software Revenue
Recognition. Payments for order flow revenues are accrued in the same period in which the related securities
transactions are completed or related services are rendered.
New Accounting Standards—Below are the new accounting pronouncements that relate to activities in
which the Company is engaged.
SFAS No. 155—Accounting for Certain Hybrid Financial Instruments
In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments,
an amendment of SFAS No. 133, as amended, and SFAS No. 140. This statement establishes, among other
things, the accounting for certain derivatives embedded in other financial instruments, which are referred to as
hybrid financial instruments. The statement simplifies accounting for certain hybrid financial instruments by
permitting fair value re-measurement for any hybrid financial instruments that contain an embedded derivative
that otherwise would require bifurcation. The statement is effective for all financial instruments acquired or
issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006, or January 1, 2007
for the Company. The Company will adopt this statement on January 1, 2007 and the impact is not expected to be
material to the Company’s financial condition, results of operations or cash flows.
SFAS No. 156—Accounting for Servicing of Financial Assets
In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets,an
amendment of SFAS No. 140. This statement establishes, among other things, the accounting for all separately
recognized servicing assets and liabilities. This statement amends SFAS No. 140 to require that all separately
recognized servicing assets and liabilities be initially measured at fair value. An entity that uses derivative
instruments to mitigate the risk inherent in servicing assets and liabilities may carry servicing assets and
liabilities at fair value. The statement is effective at the beginning of an entity’s first fiscal year that begins after
September 15, 2006, or January 1, 2007 for the Company. The Company will adopt this statement on
January 1, 2007 and the impact is not expected to be material to the Company’s financial condition, results of
operations or cash flows.
SFAS No. 157—Fair Value Measurements
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This statement establishes,
among other things, a framework for measuring fair value and expands disclosure requirements as they relate to
fair value measurements. The statement is effective at the beginning of an entity’s first fiscal year that begins
after November 15, 2007 or January 1, 2008 for the Company. The Company is currently evaluating the impact
this guidance will have on its financial condition, results of operations or cash flows.
SFAS No. 159—The Fair Value Option for Financial Assets and Financial Liabilities
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities. This Statement provides an option under which a company may irrevocably elect fair value
as the initial and subsequent measurement attribute for certain financial assets and liabilities. This fair value
option will be available on a contract-by-contract basis with changes in fair value recognized in earnings as those
changes occur. The statement is effective at the beginning of an entity’s first fiscal year that begins after
November 15, 2007 or January 1, 2008 for the Company. The Company is currently evaluating the impact this
guidance will have on its financial condition, results of operations or cash flows.
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