eTrade 2010 Annual Report Download - page 113

Scope Exception Related To Embedded Credit Derivatives
In March 2010, the FASB amended the accounting guidance for derivatives and hedging to clarify the type
of embedded credit derivative that is exempt from embedded derivative bifurcation requirements. An embedded
credit derivative that is related only to the subordination of one financial instrument to another qualifies for the
exemption. As a result, entities that have contracts containing an embedded credit derivative feature in a form
other than such subordination may need to separately account for the embedded credit derivative feature. The
amended accounting guidance became effective July 1, 2010 for the Company. The Company’s adoption of the
amended accounting guidance did not impact its financial condition, results of operations or cash flows.
Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses
In July 2010, the FASB amended the disclosure guidance for financing receivables and the allowance for
credit losses. The amendments require new and amended disclosures about nonaccrual and past due financing
receivables; the allowance for credit losses related to financing receivables; impaired loans (individually
evaluated for impairment); credit quality information; and modifications.
In January 2011, the FASB delayed the effective date of the amended disclosure guidance for TDRs. The
delay is intended to allow the FASB time to complete its deliberations on what constitutes a TDR. The effective
date of the new disclosures about TDRs and the guidance for determining what constitutes a TDR will then be
coordinated. Currently, that guidance is anticipated to become effective for interim and annual periods ending
after June 15, 2011, or June 30, 2011 for the Company.
Other than the deferral of the TDR disclosures, the amended disclosure guidance related to information as of
the end of a reporting period became effective December 31, 2010 for the Company. The Company’s disclosures
reflect the adoption of this amended disclosure guidance in Note 7—Loans, Net. Other amended disclosure
guidance related to non-TDR information for activity that occurs during a reporting period was effective
January 1, 2011 for the Company. The Company’s disclosures will reflect the adoption of the amended
disclosure guidance related to non-TDR information for activity that occurs during a reporting period in the Form
10-Q for the quarterly period ended March 31, 2011.
NOTE 2—DISCONTINUED OPERATIONS
The Company sold its Canadian brokerage business and exited its direct retail lending business in 2008.
Results of operations from these businesses have been reclassified to discontinued operations for the year ended
December 31, 2008. The Company had no discontinued operations for the years ended December 31, 2010 and
2009.
Sale of Canadian Brokerage Business
The Company sold its Canadian brokerage business to Scotiabank in 2008. The transaction resulted in a
pre-tax gain of $429.0 million and associated income tax expense of $160.2 million. The Canadian brokerage
business qualified as a discontinued operation as the Company does not have significant continuing involvement
in the Canadian brokerage business, and its operations and cash flows were eliminated from the ongoing
operations of the Company. The Company’s results of operations, net of income tax, include the Canadian
brokerage business as a discontinued operation on the Company’s consolidated statement of loss for all periods
presented. Prior to the Canadian brokerage business being recorded as a discontinued operation, it was included
in the results of operations of both the Company’s former retail and institutional segments.
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