eTrade 2009 Annual Report Download - page 112

Property and Equipment, Net—Property and equipment are carried at cost and depreciated on a straight-line
basis over their estimated useful lives, generally three to seven years. Leasehold improvements are amortized
over the lesser of their estimated useful lives or lease terms. Buildings are depreciated over the lesser of their
estimated useful lives or forty years. Land is carried at cost.
The costs of internally developed software that qualify for capitalization under internal-use software
accounting guidance are included in the property and equipment, net line item at the point at which the
conceptual formulation, design and testing of possible software project alternatives are complete and
management authorizes and commits to funding the project. The Company does not capitalize pilot projects and
projects where it believes that future economic benefits are less than probable. Technology development costs
incurred in the development and enhancement of software used in connection with services provided by the
Company that do not otherwise qualify for capitalization treatment are expensed as incurred.
Goodwill and Other Intangibles, Net—Goodwill and other intangibles, net represents the excess of the
purchase price over the fair value of net tangible assets acquired through the Company’s business combinations.
The Company tests goodwill and intangible assets with indefinite lives for impairment on at least an annual basis
or when events or changes indicate the carrying value of an asset may not be recoverable. The Company
evaluates the remaining useful lives of other intangible assets with finite lives each reporting period to determine
whether events and circumstances warrant a revision to the remaining period of amortization.
Real Estate Owned and Repossessed Assets—Included in the other assets line item in the consolidated
balance sheet is real estate acquired through foreclosure and repossessed consumer assets. Real estate properties
acquired through foreclosures, commonly referred to as REO, and repossessed assets are carried at the lower of
carrying value or fair value, less estimated selling costs.
Income Taxes—Deferred income taxes are recorded when revenues and expenses are recognized in different
periods for financial statement and tax return purposes. Deferred tax asset or liability account balances are
calculated at the balance sheet date using current tax laws and rates in effect. Valuation allowances are
established, when necessary, to reduce deferred tax assets when it is more likely than not that a portion or all of a
given deferred tax asset will not be realized. Income tax expense includes (i) deferred tax expense, which
generally represents the net change in the deferred tax asset or liability balance during the year plus any change
in valuation allowances and (ii) current tax expense, which represents the amount of tax currently payable to or
receivable from a taxing authority. Uncertain tax positions are only recognized to the extent they satisfy the
accounting for uncertain tax positions criteria included in the income taxes accounting guidance, which states
that in order to recognize an uncertain tax position it must be more likely than not that it will be sustained upon
examination. The amount of tax benefit recognized is the largest amount of tax benefit that is more than fifty
percent likely of being sustained on ultimate settlement of an uncertain tax position. See Note 16—Income
Taxes.
Securities Sold Under Agreements to Repurchase—Securities sold under agreements to repurchase the same
or similar securities, also known as repurchase agreements, are collateralized by fixed- and variable-rate
mortgage-backed securities or investment grade securities. Repurchase agreements are treated as secured
borrowings for financial statement purposes and the obligations to repurchase securities sold are reflected as such
in the consolidated balance sheet.
Customer Payables—Customer payables to customers and non-customers represent credit balances in
customer accounts arising from deposits of funds and sales of securities and other funds pending completion of
securities transactions. Customer payables primarily represent customer cash contained within the Company’s
broker-dealer subsidiaries. The Company pays interest on certain customer payables balances.
Foreign Currency Translation—Assets and liabilities of consolidated subsidiaries whose functional
currency is not the U.S. dollar are translated into U.S. dollars, the functional currency of the Company, using the
exchange rate in effect at each period end. Revenues and expenses are translated at the weighted average
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