Citibank 2008 Annual Report Download - page 208
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27. FAIR-VALUE ELECTIONS (SFAS 155, SFAS 156
AND SFAS 159)
Under SFAS 159, the Company may elect to report most financial
instruments and certain other items at fair value on an
instrument-by-instrument basis with changes in fair value reported in
earnings. After the initial adoption, the election is made upon the acquisition
of an eligible financial asset, financial liability or firm commitment or when
certain specified reconsideration events occur. The fair-value election may
not be revoked once an election is made.
Additionally, the transition provisions of SFAS 159 permit a one-time
election for existing positions at the adoption date with a cumulative-effect
adjustment included in opening retained earnings and future changes in fair
value reported in earnings.
The Company also has elected the fair-value accounting provisions
permitted under SFAS 155 and SFAS 156 for certain assets and liabilities. In
accordance with SFAS 155, which was primarily adopted on a prospective
basis, hybrid financial instruments, such as structured notes containing
embedded derivatives that otherwise would require bifurcation, as well as
certain interest-only instruments, may be accounted for at fair value if the
Company makes an irrevocable election to do so on an
instrument-by-instrument basis. The changes in fair value are recorded in
current earnings. Additional discussion regarding the applicable areas in
which SFAS 155 was adopted is presented in Note 26 on page 192.
SFAS 156 requires all servicing rights to be recognized initially at fair
value. At its initial adoption, the standard permits a one-time irrevocable
election to re-measure each class of servicing rights at fair value, with the
changes in fair value recorded in current earnings. The classes of servicing
rights are identified based on the availability of market inputs used in
determining their fair values and the methods for managing their risks. The
Company has elected fair-value accounting for its mortgage and student
loan classes of servicing rights. The impact of adopting this standard was not
material. See Note 23 on page 175 for further discussions regarding the
accounting and reporting of mortgage servicing rights.
202