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FIN No. 48—Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement 109
In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes—
an interpretation of FASB Statement 109 (“FIN 48”) which will become effective for the Company on
January 1, 2007. The cumulative effect of adopting FIN 48 will be recorded as a change to opening retained
earnings in the first quarter of 2007. The interpretation prescribes a recognition threshold and a measurement
attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken
in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained
upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that
is greater than 50% likely of being realized upon ultimate settlement. We have not yet completed our analysis of
the impact that FIN 48 will have on the Company.
Staff Accounting Bulletin (“SAB”) No. 108—Considering the Effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year Financial Statements
In September 2006, the SEC issued SAB No. 108, Considering the Effects of Prior Year Misstatements
when Quantifying Misstatements in Current Year Financial Statements. This bulletin states that a company
should evaluate the impact of all misstatements under both the “rollover” and “iron curtain” methods. The
statement is effective at the beginning of an entity’s first fiscal year ending after November 15, 2006, or
December 31, 2006 for the Company. The adoption of this bulletin did not have a material impact to the
Company’s financial condition, results of operations or cash flows.
NOTE 2—BUSINESS COMBINATIONS
Over the past three 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
statement of income. The results of operations of each are included in the Company’s consolidated statement of
income from the date of each acquisition.
2006 Acquisitions
Retirement Advisors of America
On August 1, 2006, the Company completed its acquisition of RAA, a Dallas, Texas-based investment
advisor managing over $1 billion in assets. We believe this acquisition strengthens our regional advisor business,
which delivers localized wealth management services and advice to retail clients with a minimum of $250,000 in
assets. The aggregate purchase price of approximately $24.9 million included $19.8 million, or 0.8 million
shares, in common stock issued and $5.1 million in cash. At acquisition, the purchase price included
approximately $0.1 million in net assets acquired, $9.5 million in customer list and other intangibles and
$1.6 million held in escrow, with the remaining $13.7 million recorded as goodwill. As of December 31, 2006,
approximately $1.3 million of the purchase price remained in escrow. The intangible assets will be amortized
over approximately 18 years on an accelerated basis.
2005 Acquisitions
Consistent with our strategy to grow through both strategic acquisitions and organic growth, we completed
four acquisitions in 2005.
BrownCo
On November 30, 2005, the Company completed its acquisition of BrownCo, an online discount brokerage
business with approximately 186,000 customer accounts, from JP Morgan Chase & Co. for an aggregate
purchase price of approximately $1,629.7 million in cash including $691.8 million, or 39.7 million shares, in
common stock issued. At acquisition, the purchase price included approximately $306.6 million in net assets
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