Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of presentation policy

The accounting and financial reporting policies of JPMorgan Chase and its subsidiaries conform to accounting principles generally accepted in the U.S. (“U.S. GAAP”). Additionally, where applicable, the policies conform to the accounting and reporting guidelines prescribed by regulatory authorities.

Use of estimates in the preparation of consolidated financial statements policy

The unaudited Consolidated Financial Statements prepared in conformity with U.S. GAAP require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expense, and the disclosures of contingent assets and liabilities. Actual results could be different from these estimates. In the opinion of management, all normal, recurring adjustments have been included for a fair statement of this interim financial information.

Reclassifications policy

Certain amounts reported in prior periods have been reclassified to conform with the current presentation.

New accounting guidance

Effective January 1, 2015, the Firm adopted new accounting guidance for investments in affordable housing projects that qualify for the low-income housing tax credit, which impacted the Corporate & Investment Bank (“CIB”). As a result of the adoption of this new guidance, the Firm made an accounting policy election to amortize the initial cost of its qualifying investments in proportion to the tax credits and other benefits received, and to present the amortization as a component of income tax expense; previously such amounts were predominantly presented in other income. The guidance was required to be applied retrospectively and accordingly, certain prior period amounts have been revised to conform with the current period presentation. The cumulative effect on retained earnings was a reduction of$321 millionas of January 1, 2014. The adoption of this accounting guidance resulted in an increase of$224 millionand$229 millionin other income and income tax expense, respectively, for the three months ended June 30, 2014, and $446 million and $456 million, respectively, for the six months ended June 30, 2014, which led to an increase of approximately2%in the effective tax rate for the three and six months ended June 30, 2014. The impact on net income and earnings per share in the periods affected was not material.

The Firm recognized $381 million and $384 million of tax credits and other tax benefits associated with these investments within Income tax expense for the three months ended June 30, 2015 and 2014, respectively, and $758 million and $763 million for the six months ended June 30, 2015 and 2014, respectively. The amount of amortization of such investments reported in income tax expense under the current period presentation was $281 million and $267 million, for the three months ended June 30, 2015 and 2014, respectively, and $555 million and $531 million for the six months ended June 30, 2015, respectively.

The carrying value of investments in affordable housing projects was $7.1 billion and $7.3 billion at June 30, 2015 and December 31, 2014, respectively. These investments are reported in other assets on the Firm’s Consolidated balance sheets. The amount of commitments related to these investments was $1.7 billion and $1.8 billion at June 30, 2015, and December 31, 2014, respectively. These commitments are reported in accounts payable and other liabilities on the Firm’s Consolidated balance sheets.

Offsetting assets and liabilities policy

U.S. GAAP permits entities to present derivative receivables and derivative payables with the same counterparty and the related cash collateral receivables and payables on a net basis on the balance sheet when a legally enforceable master netting agreement exists. U.S. GAAP also permits securities sold and purchased under repurchase agreements to be presented net when specified conditions are met, including the existence of a legally enforceable master netting agreement. The Firm has elected to net such balances when the specified conditions are met.