Freddie Mac 2009 Annual Report Download - page 229

August 28, 2009 with early adoption permitted. We adopted this amendment on October 1, 2009 and the adoption had no
impact on our consolidated financial statements.
Change in the Impairment Model for Debt Securities
On April 1, 2009 we prospectively adopted an amendment to the accounting standards for investments in debt and
equity securities, which provides additional guidance in accounting for and presenting impairment losses on debt securities.
This amendment changes the recognition, measurement and presentation of other-than-temporary impairment for debt
securities, and is intended to bring greater consistency to the timing of impairment recognition and provide greater clarity to
investors about the credit and non-credit components of impaired debt securities that are not expected to be sold. It also
changes (a) the method for determining whether an other-than-temporary impairment exists, and (b) the amount of an
impairment charge to be recorded in earnings. To determine whether an other-than-temporary impairment exists, we assess
whether we intend to sell or more likely than not will be required to sell the security prior to its anticipated recovery. The
entire amount of other-than-temporary impairment related to securities which we intend to sell or for which it is more likely
than not that we will be required to sell, is recognized in our consolidated statements of operations as net impairment on
available-for-sale securities recognized in earnings. For securities that we do not intend to sell or for which it is more likely
than not that we will not be required to sell, but for which we do not expect to recover the securities’ amortized cost basis,
the amount of other-than-temporary impairment is separated between amounts recorded in earnings or AOCI. Other-than-
temporary impairment amounts related to credit loss are recognized in net impairment of available-for-sale securities
recognized in earnings and the amounts attributable to all other factors are recorded to AOCI.
As a result of the adoption, we recognized a cumulative-effect adjustment, net of tax, of $15.0 billion to our opening
balance of retained earnings (accumulated deficit) on April 1, 2009, with a corresponding adjustment of $(9.9) billion, net of
tax, to AOCI. The cumulative adjustment reclassifies the non-credit component of previously recognized other-than-
temporary impairments from retained earnings to AOCI. The difference between these adjustments of $5.1 billion primarily
represents the release of the valuation allowance previously recorded against the deferred tax asset that is no longer required
upon adoption of this amendment. See “NOTE 6: INVESTMENTS IN SECURITIES” for further disclosures regarding our
investments in securities and other-than-temporary impairments.
Subsequent Events
We prospectively adopted an amendment to the accounting standards for subsequent events on April 1, 2009. This
Statement establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but
before financial statements are issued or are available to be issued. In particular, this statement sets forth (a) the period after
the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur
for potential recognition or disclosure in the financial statements, (b) the circumstances under which an entity should
recognize events or transactions occurring after the balance sheet date in its financial statements, and (c) the disclosures that
an entity should make about events or transactions that occurred after the balance sheet date. It also requires entities to
disclose the date through which subsequent events have been evaluated and whether that date is the date that financial
statements were issued or the date they were available to be issued. The adoption of this amendment did not have a material
impact on our consolidated financial statements.
Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities
On January 1, 2009, we retrospectively adopted an amendment to the accounting standards for earnings per share. The
guidance in this amendment applies to the calculation of earnings per share for share-based payment awards with rights to
dividends or dividend equivalents. It clarifies that unvested share-based payment awards that contain nonforfeitable rights to
dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the
computation of earnings per share pursuant to the two-class method. Our adoption of this amendment did not have a material
impact on our consolidated financial statements.
Noncontrolling Interests
We adopted an amendment to the accounting standards for consolidation regarding noncontrolling interests in
consolidated financial statements on January 1, 2009. After adoption, noncontrolling interests (referred to as a minority
interest prior to adoption) are classified within equity (deficit), a change from their previous classification between liabilities
and stockholders’ equity (deficit). Income (loss) attributable to noncontrolling interests is included in net income (loss),
although such income (loss) continues to be deducted to measure earnings per share. The amendment also requires
retrospective application of expanded presentation and disclosure requirements. The adoption of this amendment did not have
a material impact on our consolidated financial statements.
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