Accounting Policies

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Accounting Policies

BUSINESS

The PNC Financial Services Group, Inc. (PNC) is one of the largest diversified financial services companies in the United States and is headquartered in Pittsburgh, Pennsylvania.

We have businesses engaged in retail banking, including residential mortgage, corporate and institutional banking and asset management, providing many of our products and services nationally. Our retail branch network is located in markets across the Mid-Atlantic, Midwest and Southeast. We also have strategic international offices in four countries outside the U.S.ACCOUNTING POLICIES

Basis of Financial Statement Presentation

Our consolidated financial statements include the accounts of the parent company and its subsidiaries, most of which are wholly-owned, certain partnership interests and variable interest entities.

We prepared these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP). We have eliminated intercompany accounts and transactions. We have also reclassified certain prior year amounts to conform to the current period presentation, which did not have a material impact on our consolidated financial condition or results of operations.

In our opinion, the unaudited interim consolidated financial statements reflect all normal, recurring adjustments needed to present fairly our results for the interim periods. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period.

We have also considered the impact of subsequent events on these consolidated financial statements.

When preparing these unaudited interim consolidated financial statements, we have assumed that you have read the audited consolidated financial statements included in our 2018 Form 10-K. Reference is made to Note 1 Accounting Policies in our 2018 Form 10-K for a detailed description of significant accounting policies. There have been no significant changes to our accounting policies as disclosed in our 2018 Form 10-K, except for the adoption of the new leasing standard included in this Note 1 in the first quarter of 2019. These interim consolidated financial statements serve to update our 2018 Form 10-K and may not include all information and Notes necessary to constitute a complete set of financial statements.

Use of Estimates

We prepared these consolidated financial statements using financial information available at the time of preparation, which requires us to make estimates and assumptions that affect the amounts reported. Our most significant estimates pertain to our fair value measurements and allowances for loan and lease losses and unfunded loan commitments and letters of credit. Actual results may differ from the estimates and the differences may be material to the consolidated financial statements.

Leases

We provide financing for various types of equipment, including aircraft, energy and power systems, and vehicles through a variety of lease arrangements. Direct financing leases are carried at the aggregate of lease payments plus estimated residual value of the leased equipment, less unearned income. We recognize income over the term of the lease using the constant effective yield method. Direct financing lease residual values are reviewed for impairment in accordance with the Allowance for Loan and Lease (ALLL) processes. Gains or losses on the sale of leased assets are included in Other noninterest income while impairment on the net investment of leases is included in Provision for credit losses.

We also enter into various lease arrangements, primarily involving real estate, and other equipment, as the lessee. For those classified as operating leases, we recognize a lease liability, representing the present value of the minimum lease payments, and a corresponding right of use (ROU) asset. On the consolidated balance sheet, the ROU asset and lease liability are included in Other assets and Other liabilities, respectively.

When we adopted the Accounting Standards Update (ASU) 2016-02 - Leases as of January 1, 2019, we recognized lease liabilities and right-of-use assets of $2.1 billion and $2.0 billion, respectively. In addition, we recognized a one-time pretax adjustment of $83 million to retained earnings, related primarily to deferred gains on previous sale-leaseback transactions. See Note 16 Leases for additional information related to leases within the scope of ASC 842.

Recently Adopted Accounting Standards

During the second quarter of 2019, we did not adopt any new accounting standards that had a significant impact.