Freddie Mac 2009 Annual Report Download - page 189

Table 80 — Contractual Obligations by Year at December 31, 2009
Total 2010 2011 2012 2013 2014 Thereafter
(in millions)
Long-term debt
(1)
............................. $566,780 $105,729 $135,514 $ 94,362 $47,386 $53,372 $130,417
Short-term debt
(1)
............................. 238,293 238,293 — — — — —
Interest payable
(2)
............................. 81,983 17,044 12,536 10,157 7,760 6,219 28,267
Other liabilities reflected on our consolidated balance sheet:
Other contractual liabilities
(3)(4)(5)
................ 3,278 3,035 53 15 16 10 149
Purchase obligations:
Purchase commitments
(6)
...................... 7,970 7,970 — — — — —
Other purchase obligations ..................... 324 262 34 20 5 1 2
Operating lease obligations. . ..................... 74 19 11 77723
Total specified contractual obligations ............. $898,702 $372,352 $148,148 $104,561 $55,174 $59,609 $158,858
(1) Represents par value. Callable debt is included in this table at its contractual maturity. For additional information about our debt, see “NOTE 9: DEBT
SECURITIES AND SUBORDINATED BORROWINGS” to our consolidated financial statements.
(2) Includes estimated future interest payments on our short-term and long-term debt securities. Also includes accrued interest payable recorded on our
consolidated balance sheet, which consists primarily of the accrual of interest on short-term and long-term debt as well as the accrual of periodic cash
settlements of derivatives, netted by counterparty.
(3) Other contractual liabilities primarily represent future cash payments due under our contractual obligations to make delayed equity contributions to
LIHTC partnerships and payables to the trusts established for the administration of cash remittances received related to the underlying assets of our PCs
and Structured Securities issued.
(4) Accrued obligations related to our defined benefit plans, defined contribution plans and executive deferred compensation plan are included in the Total
and 2010 columns. However, the timing of payments due under these obligations is uncertain. See “NOTE 16: EMPLOYEE BENEFITS” to our
consolidated financial statements for additional information.
(5) As of December 31, 2009, we have recorded tax liabilities for unrecognized tax benefits totaling $805 million and allocated interest of $233 million.
These amounts have been excluded from this table because we cannot estimate the years in which these liabilities may be settled. See “NOTE 15:
INCOME TAXES” to our consolidated financial statements for additional information.
(6) Purchase commitments represent our obligations to purchase mortgage loans and mortgage-related securities from third parties. The majority of
purchase commitments included in this caption are accounted for as derivatives in accordance with the accounting standards for derivatives and hedging.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with GAAP requires us to make a number of judgments, estimates
and assumptions that affect the reported amounts of our assets, liabilities, income and expenses. Certain of our accounting
policies, as well as estimates we make, are “critical,” as they are both important to the presentation of our financial condition
and results of operations and require management to make difficult, complex or subjective judgments and estimates, often
regarding matters that are inherently uncertain. Actual results could differ from our estimates and the use of different
judgments and assumptions related to these policies and estimates could have a material impact on our consolidated financial
statements.
Our critical accounting policies and estimates relate to: (a) valuation of a significant portion of assets and liabilities;
(b) allowances for loan losses and reserve for guarantee losses; (c) application of the static effective yield method to
amortize the guarantee obligation; (d) application of the effective interest method; (e) impairment recognition on investments
in securities and LIHTC partnership investments; and (f) realizability of net deferred tax assets. For additional information
about our critical accounting policies and estimates and other significant accounting policies, including recently issued
accounting pronouncements, see “NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES” to our consolidated
financial statements.
Valuation of a Significant Portion of Assets and Liabilities
A significant portion of our assets and liabilities within our consolidated financial statements is based on fair value,
including (i) mortgage-related and non-mortgage related securities, (ii) mortgage loans held-for-sale, (iii) derivative
instruments, (iv) guarantee asset, (v) guarantee obligation, (vi) debt securities denominated in foreign currencies, (vii) REO
less estimated costs to sell and (viii) impaired LIHTC partnership investments. For certain of these assets and liabilities,
which are complex in nature, the measurement of fair value requires significant management judgments and assumptions.
These judgments and assumptions, as well as changes in market conditions, may have a material effect on our GAAP
consolidated balance sheets and statements of operations as well as our consolidated fair value balance sheets.
Fair value affects our statements of operations in the following ways:
• For certain financial instruments that are recorded in the GAAP consolidated balance sheets at fair value, changes in
fair value are recognized in current period earnings. These include:
— mortgage-related securities classified as trading, which are recorded in gains (losses) on investment activity;
— derivatives with no hedge designation, which are recorded in derivative gains (losses);
— the guarantee asset, which is recorded in gains (losses) on guarantee asset; and
— debt securities recorded at fair value, which are recorded in gains (losses) on debt recorded at fair value.
186 Freddie Mac