Bank One Corporation - Page 24

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          encountered problems under which it had difficulty meeting its 2-           
          business-day deadline.  The Devon system, for example, did not              
          automatically post to the general ledger, and thousands of                  
          entries had to be entered manually each month.  Because FNBC was            
          unable to enter all of these entries correctly within 2 business            
          days after the close of the year, it established the early                  
          closing date.                                                               
               FNBC’s use of its early closing date was approved by FNBC’s            
          chief accounting officer, and the stub period adjustments (those            
          adjustments for the period extending from the early closing date            
          until the yearend date) were discussed with FNBC’s outside                  
          auditors.  FNBC’s auditors concluded that FNBC’s financial                  
          statements presented fairly, in all material respects, FNBC’s               
          financial position at yearend.                                              
          X.  FNBC’s Administrative Costs Adjustment                                  
               A.  Overview                                                           
               FNBC made an internal forecast of future administrative                
          costs which it expected to incur in administering its existing              
          swap portfolio to maturity.  For Federal income tax purposes,               
          FNBC considered the present value of these costs an adjustment to           
          the midmarket value of its swaps.  FNBC ascertained its forecast            
          by (1) projecting future costs to manage the current portfolio of           
          swaps and interest rate guarantees; (2) reducing the projected              
          costs in each future year by the proportion of the current                  






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Last modified: May 25, 2011