Citibank 2009 Annual Report Download - page 244

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234
27. FAIR VALUE ELECTIONS
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 ASC 825-10 (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 to adopt the fair value accounting
provisions for certain assets and liabilities prospectively. 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 fair value elections were made is
presented in Note 26 to the Consolidated Financial Statements.
All servicing rights must now be recognized initially at fair value. At its
initial adoption, the standard permitted 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 to the Consolidated Financial Statements for further discussions
regarding the accounting and reporting of mortgage servicing rights.