Summary of Significant Accounting Policies

Basis of Presentation:

The accounting and financial reporting policies of State Street Corporation conform to U.S. GAAP. State Street Corporation, the parent company, is a financial holding company headquartered in Boston, Massachusetts. Unless otherwise indicated or unless the context requires otherwise, all references in these notes to consolidated financial statements to “State Street,” “we,” “us,” “our” or similar references mean State Street Corporation and its subsidiaries on a consolidated basis. Our principal banking subsidiary is State Street Bank.

We have two lines of business:

Investment Servicing provides services for mutual funds, collective investment funds and other investment pools, corporate and public retirement plans, insurance companies, foundations and endowments worldwide. Products include custody; product- and participant-level accounting; daily pricing and administration; master trust and master custody; record-keeping; cash management; foreign exchange, brokerage and other trading services; securities finance; deposit and short-term investment facilities; loans and lease financing; investment manager and alternative investment manager operations outsourcing; and performance, risk and compliance analytics to support institutional investors.

Investment Management, through SSGA, provides a broad array of investment management, investment research and investment advisory services to corporations, public funds and other sophisticated investors. SSGA offers active and passive asset management strategies across equity, fixed-income and cash asset classes. Products are distributed directly and through intermediaries using a variety of investment vehicles, including ETFs, such as the SPDR^® ETF brand.

Consolidation:

Our consolidated financial statements include the accounts of the parent company and its majority- and wholly-owned and otherwise controlled subsidiaries, including State Street Bank. All material inter-company transactions and balances have been eliminated. Certain previously reported amounts have been reclassified to conform to current-year presentation.

We consolidate subsidiaries in which we exercise control. Investments in unconsolidated subsidiaries, recorded in other assets, generally are accounted for under the equity method of accounting if we have the ability to exercise significant influence over the operations of the investee. For investments accounted for under the equity method, our share of income or loss is recorded in processing fees and other revenue in our consolidated statement of income. Investments not meeting the criteria for equity-method treatment are accounted for under the cost method of accounting.

Use of Estimates:

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions in the application of certain of our significant accounting policies that may materially affect the reported amounts of assets, liabilities, equity, revenue, and expenses. As a result of unanticipated events or circumstances, actual results could differ from those estimates.

Foreign Currency Translation:

The assets and liabilities of our operations with functional currencies other than the U.S. dollar are translated at month-end exchange rates, and revenue and expenses are translated at rates that approximate average monthly exchange rates. Gains or losses from the translation of the net assets of subsidiaries with functional currencies other than the U.S. dollar, net of related taxes, are recorded in AOCI, a component of shareholders’ equity.

Cash and Cash Equivalents:

For purposes of the consolidated statement of cash flows, cash and cash equivalents are defined as cash and due from banks.

Interest-Bearing Deposits with Banks:

Interest-bearing deposits with banks generally consist of highly liquid, short-term investments maintained at the Federal Reserve Bank and other non-U.S. central banks with original maturities at the time of purchase of one month or less.

Securities Purchased Under Resale Agreements and Securities Sold Under Repurchase Agreements:

Securities purchased under resale agreements and sold under repurchase agreements are treated as collateralized financing transactions, and are recorded in our consolidated statement of condition at the amounts at which the securities will be subsequently resold or repurchased, plus accrued interest. Our policy is to take possession or control of securities underlying resale agreements either directly or through agent banks, allowing borrowers the right of collateral substitution and/or short-notice termination. We revalue these securities daily to determine if additional collateral is necessary from the borrower to protect us against credit exposure. We can use these securities as collateral for repurchase agreements.

For securities sold under repurchase agreements collateralized by our investment securities portfolio, the dollar value of the securities remains in investment securities in our consolidated statement of condition. Where a master netting agreement exists or both parties are members of a common clearing organization, resale and repurchase agreements with the same counterparty or clearing house and maturity date are recorded on a net basis.

Fee and Net Interest Revenue:

Fees from investment servicing, investment management, securities finance, trading services and certain types of processing fees and other revenue are recorded in our consolidated statement of income based on estimates or specific contractual terms, including mutually agreed changes to terms, as transactions occur or services are rendered, provided that persuasive evidence exists, the price to the client is fixed or determinable and collectability is reasonably assured. Amounts accrued at period-end are recorded in accrued interest and fees receivable in our consolidated statement of condition. Performance fees generated by our investment management activities are recorded when earned, based on predetermined benchmarks associated with the applicable fund’s performance.

Interest revenue on interest-earning assets and interest expense on interest-bearing liabilities are recorded in our consolidated statement of income as components of net interest revenue, and are generally based on the effective yield of the related financial asset or liability.

Other Significant Policies:

The following table identifies our other significant accounting policies and the note and page where a detailed description of each policy can be found.



Fair Value	Note	2	Page
Investment Securities	Note	3	Page
Loans and Leases	Note	4	Page
Goodwill and Other Intangible Assets	Note	5	Page
Derivative Financial Instruments	Note	10	Page
Offsetting Arrangements	Note	11	Page
Contingencies	Note	13	Page
Variable Interest Entities	Note	14	Page
Regulatory Capital	Note	16	Page
Equity-Based Compensation	Note	18	Page
Income Taxes	Note	22	Page
Earnings Per Common Share	Note	23	Page

Recent Accounting Developments:

In January 2016, the FASB issued an amendment that changes the accounting for equity securities. Under the revised standard, all equity securities will be measured at fair value through earnings with certain exceptions, including investments accounted for under the equity method of accounting. In addition, the FASB clarified guidance related to valuation allowance assessments when recognizing deferred tax assets on unrealized losses on available-for-sale debt securities. The amendments are effective for State Street beginning January 1, 2018. We are currently assessing the potential impact of these amendments on our consolidated financial statements.

In September 2015 the FASB issued an amendment that requires an acquirer to recognize purchase price adjustments to provisional amounts in the reporting period in which the adjustments are determined, as opposed to being applied retrospectively at the acquisition date. The amendment, which allows for early adoption, is effective for State Street beginning on January 1, 2016. We did not have any significant acquisitions in 2015 that could have a material impact on future consolidated financial statements. We will assess the amendment's impact in conjunction with new transactions, as applicable.

In July 2015, the FASB issued an update to delay the effective date of the new revenue standard by one year. The deferral relates to the FASB standard issued in May 2014, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The standard permits the use of either retrospective or cumulative effect transition method. The deferral results in the new revenue standard being effective for State Street beginning on January 1, 2018. We are evaluating the effect on the consolidated financial statements and related disclosures.

In May 2015, the FASB issued an amendment that makes certain technical corrections to the FASB Accounting Standards Codification that affect a wide variety of topics to clarify the codification, correct unintended application of the guidance, or make minor improvements that are not expected to have a significant effect on current accounting practice. The amendments that require transition guidance are effective for State Street beginning on January 1, 2016 and all other amendments are effective immediately. Our adoption of this amendment will not have a material impact on our consolidated financial statements.

In May 2015, the FASB issued an amendment to U.S. GAAP which removes from the fair value hierarchy, investments for which the practical expedient is used to measure fair value at NAV. Instead, an entity is required to include those investments as a reconciling line item so that the total fair value amount of investments in the disclosure is consistent with the amount on the balance sheet. The amendment is effective for State Street beginning on January 1, 2016 and is required to be applied retrospectively. The adoption of this amendment will have no impact on our consolidated financial statements.

In April 2015, the FASB issued an amendment to U.S. GAAP which will assist entities in evaluating the accounting for fees paid by a customer in a cloud computing arrangement. The amendment, which allows for early adoption, is effective for State Street beginning on January 1, 2016. Our adoption of this amendment is not expected to have a material effect on our consolidated financial statements.

In April 2015, the FASB issued an amendment to U.S. GAAP that requires debt issuance costs to be presented in the consolidated balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. This amendment, which allows for early adoption, is effective for State Street beginning on January 1, 2016. Our debt issuance costs that are currently classified as deferred credits have a balance of approximately $37 million as of December 31, 2015 and will be reclassified as contra liabilities upon adoption.

In August 2015, the FASB issued a related amendment to clarify that debt issuance costs relating to line of credit arrangements may still be presented as an asset, notwithstanding the April 2015 amendment that requires debt issuance costs relating to recognized debt liabilities to be recognized as contra liabilities. Our adoption of this amendment will not have a material effect on our consolidated financial statements.

In February 2015, the FASB issued an amendment to U.S. GAAP that updates the consolidation model used to evaluate whether a legal entity is required to be consolidated. The amendment is effective for State Street beginning on January 1, 2016, and may be applied retrospectively or via a modified retrospective approach. The amendment eliminated the indefinite deferral of Accounting Standard Update 2010-10 “Amendments for Certain Investment Funds” for asset management funds with characteristics of an investment company and also eliminated the presumption that a general partner should consolidate a limited partnership. The amendment also changed the consolidation analysis for fee arrangements that meet certain requirements and for related party relationships. Certain money market funds are excluded from the scope of the amendment. Based on our assessment of the amendment, our adoption of this amendment will not have a material effect on our consolidated financial statements.

In February 2015, the FASB issued an amendment to U.S. GAAP to remove the concept of "extraordinary items," which are defined as items that are unusual and infrequent in nature. The amendment, which allows for early adoption, is effective for State Street beginning on January 1, 2016. Our adoption of this amendment will not have a material effect on our consolidated financial statements.

Revisions of Previously-Issued Financial Statements:

During the fourth quarter of fiscal year 2015, we identified and corrected errors reported in prior periods and assessed the materiality of the errors. The errors arose from a review into the manner in which we invoiced certain expenses to certain of our asset servicing clients, primarily in the U.S., during an 18-year period going back to 1998. As a result of this review, we determined that we had incorrectly invoiced clients in the aggregate amount of approximately $240 million.

We determined that the errors were immaterial to each of the prior reporting periods affected, however we concluded that correcting the errors cumulatively in fiscal year 2015 would materially misstate our consolidated statement of income for the year ended December 31, 2015. Accordingly, our financial results for all prior periods presented herein have been revised to correct the errors. Additionally, we have corrected for a previously disclosed an immaterial out-of-period adjustment that had been included in our 2013 tax expense and related to prior periods. The cumulative effect of the errors has been reflected in the beginning retained earnings balance as of January 1, 2013 in the amount of $44 million in the consolidated statement of changes in shareholders' equity. The table below shows the effect of the errors on our consolidated statement of income and our consolidated statement of condition for the periods presented.



	Year Ended December 31, 2014							Year Ended December 31, 2013
(In millions, except per share amounts)	Previously Reported		Correction			Revised		Previously Reported		Correction			Revised
Servicing fee revenue	$	5,129	$	(21	)	$	5,108	$	4,819	$	(20	)	$	4,799
Total revenue	10,295		(21		)	10,274		9,884		(20		)	9,864
Income before income tax expense	2,458		(21		)	2,437		2,686		(20		)	2,666
Income tax expense	421		(6		)	415		550		66			616
Net income	2,037		(15		)	2,022		2,136		(86		)	2,050
Earnings per share:
Basic	$	4.65	$	(0.03	)	$	4.62	$	4.71	$	(0.19	)	$	4.52
Diluted	4.57		(0.04		)	4.53		4.62		(0.19		)	4.43



	December 31, 2014
(In millions, except per share amounts)	Previously Reported		Correction			Revised
Total assets	$	274,119	$	—		$	274,119
Total liabilities	252,646		145			252,791
Retained earnings	14,882		(145		)	14,737
Total equity	21,473		(145		)	21,328
Total liabilities and shareholders' equity	274,119		—			274,119