Management’s discussion and analysis ACCOUNTING AND REPORTING DEVELOPMENTS JPMorgan Chase & Co./2020 Form 10-K 156 Standard Summary of guidance Effects on financial statements Financial Instruments - Credit Losses (“CECL”) Issued June 2016 • Establishes a single allowance framework for all financial assets measured at amortized cost and certain off-balance sheet credit exposures. This framework requires that management’s estimate reflects credit losses over the instrument’s remaining expected life and considers expected future changes in macroeconomic conditions. • Eliminates existing guidance for PCI loans, and requires recognition of the nonaccretable difference as an increase to the allowance for expected credit losses on financial assets purchased with more than insignificant credit deterioration since origination, with a corresponding increase in the amortized cost of the related loans. • Requires inclusion of expected recoveries, limited to the cumulative amount of prior writeoffs, when estimating the allowance for credit losses for in scope financial assets (including collateral-dependent assets). • Amends existing impairment guidance for AFS securities to incorporate an allowance, which will allow for reversals of credit impairments in the event that the credit of an issuer improves. • Requires a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption. • Adopted January 1, 2020. • Refer to Note 1 for further information. Goodwill Issued January 2017 • Requires recognition of an impairment loss when the estimated fair value of a reporting unit falls below its carrying value. • Eliminates the requirement that an impairment loss be recognized only if the estimated implied fair value of the goodwill is below its carrying value. • Adopted January 1, 2020. • No impact upon adoption as the guidance was applied prospectively. • Refer to Note 15 for further information. Reference Rate Reform Issued March 2020 and updated January 2021 • Provides optional expedients and exceptions to current accounting guidance when financial instruments, hedge accounting relationships, and other transactions are amended due to reference rate reform. • Provides an election to account for certain contract amendments related to reference rate reform as modifications rather than extinguishments without the requirement to assess the significance of the amendments. • Allows for changes in critical terms of a hedge accounting relationship without automatic termination of that relationship. Provides various practical expedients and elections designed to allow hedge accounting to continue uninterrupted during the transition period. • Provides a one-time election to transfer securities out of the held-to-maturity classification if certain criteria are met. • The January 2021 update provides an election to account for derivatives modified to change the rate used for discounting, margining, or contract price alignment (collectively “discounting transition”) as modifications. • Issued and effective March 12, 2020. The January 7, 2021 update was effective when issued. • The Firm elected to apply certain of the practical expedients related to contract modifications and hedge accounting relationships, and discounting transition beginning in the third quarter of 2020. The discounting transition election was applied retrospectively. The main purpose of the practical expedients is to ease the administrative burden of accounting for contracts impacted by reference rate reform, and these elections did not have a material impact on the Consolidated Financial Statements. Financial Accounting Standards Board (“FASB”) Standards Adopted since January 1, 2020