eTrade 2010 Annual Report Download - page 112

Share-Based Payments—The Company records share-based payments expense in accordance with the stock
compensation accounting guidance. The Company records compensation cost at the grant date fair value of a
share-based payment award over the vesting period less estimated forfeitures. The underlying assumptions to
these fair value calculations are discussed in Note 19—Employee Share-Based Payments and Other Benefits.
Additionally, the Company elected to use the alternative transition method provided for calculating the tax
effects of share-based compensation pursuant to the stock compensation accounting guidance. Share-based
payments expense is included in the compensation and benefits line item.
Advertising and Market Development—Advertising production costs are expensed when the initial
advertisement is run.
Net Loss Per Share—Basic net loss per share is computed by dividing net loss by the weighted-average
common shares outstanding for the period. Diluted net loss per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or converted into common stock. The
Company excludes from the calculation of diluted net loss per share stock options, unvested restricted stock
awards and units and shares related to convertible debentures that would have been anti-dilutive.
New Accounting and Disclosure Guidance—Below is the new accounting and disclosure guidance that
relates to activities in which the Company is engaged.
Accounting for Transfers of Financial Assets
In June 2009, the Financial Accounting Standards Board (“FASB”) amended the derecognition provisions in
the accounting guidance for transfers and servicing, including the removal of the concept of qualifying special-
purpose entities (“QSPEs”). The Company’s adoption of the amended derecognition provisions to transfers of
financial assets, which did not impact its financial condition, results of operations or cash flows, has been applied
to transfers of financial assets occurring on or after January 1, 2010.
Consolidation of Variable Interest Entities
In June 2009, the FASB amended the accounting and disclosure guidance for the consolidation of variable
interest entities. The amended accounting guidance required the reconsideration of previous conclusions related
to the consolidation of variable interest entities, including whether an entity is a variable interest entity and
whether the Company is the variable interest entity’s primary beneficiary. The amended accounting guidance
carried forward the scope of the previous accounting guidance for the consolidation of variable interest entities
with the addition of entities previously considered QSPEs. The amended accounting and disclosure guidance
became effective January 1, 2010 for the Company. The Company’s reconsideration of previous conclusions
related to the consolidation of variable interest entities did not result in the consolidation of additional entities as
of January 1, 2010. Effective January 1, 2010, the Company’s assessment of whether it is a variable interest
entity’s primary beneficiary is ongoing and considers changes in facts and circumstances related to the variable
interest entities.
Improving Disclosures about Fair Value Measurements
In January 2010, the FASB amended the disclosure guidance related to fair value measurements. The
amended disclosure guidance requires new fair value measurement disclosures and clarifies existing fair value
measurement disclosure requirements. The amended disclosure guidance requires separate presentation of
purchases, sales, issuances and settlements of Level 3 instruments and was effective January 1, 2011 for the
Company. The Company’s disclosures about fair value measurements will reflect the adoption of the requirement
for separate presentation of purchases, sales, issuances and settlements of Level 3 instruments in the Form 10-Q
for the quarterly period ended March 31, 2011. The remaining amended disclosure guidance became effective
January 1, 2010 for the Company. The Company’s disclosures about fair value measurements reflect the adoption
of the remaining disclosure guidance in Note 5—Fair Value Disclosures.
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