Freddie Mac 2010 Annual Report Download - page 163

Table 65 — Contractual Obligations by Year at December 31, 2010
Total 2011 2012 2013 2014 2015 Thereafter
(in millions)
Long-term debt
(1)
.............................. $530,978 $120,951 $138,474 $79,177 $36,328 $45,779 $110,269
Short-term debt
(1)
.............................. 197,239 197,239 — — — — —
Interest payable
(2)
.............................. 74,969 19,861 10,239 8,039 6,375 5,416 25,039
Other liabilities reflected on our consolidated balance sheet:
Other contractual liabilities
(3)(4)(5)
................. 948 737 15 14 10 9 163
Purchase obligations:
Purchase commitments
(6)
....................... 14,513 14,513 — — — — —
Other purchase obligations ...................... 478 406 46 12 6 3 5
Operating lease obligations. . ...................... 31 11 7 4 3 2 4
Total specified contractual obligations .............. $819,156 $353,718 $148,781 $87,246 $42,722 $51,209 $135,480
(1) Represents par value. Callable debt is included in this table at its contractual maturity. Excludes debt securities of consolidated trusts held by third
parties. For additional information about our debt, see “NOTE 9: DEBT SECURITIES AND SUBORDINATED BORROWINGS.”
(2) Includes estimated future interest payments on our short-term and long-term debt securities as well as the accrual of periodic cash settlements of
derivatives, netted by counterparty. Also includes accrued interest payable recorded on our consolidated balance sheet, which consists primarily of the
accrual of interest for our PCs and certain Other Guarantee Transactions, and the accrual of interest on short-term and long-term debt.
(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 consolidated trusts established for the administration of cash remittances received related to the underlying
assets of Freddie Mac mortgage-related securities.
(4) Accrued obligations related to our defined benefit plans, defined contribution plans, and executive deferred compensation plan are included in the Total
and 2011 columns. However, the timing of payments due under these obligations is uncertain. See “NOTE 15: EMPLOYEE BENEFITS” for additional
information.
(5) As of December 31, 2010, we have recorded tax liabilities for unrecognized tax benefits totaling $1.2 billion and allocated interest of $248 million.
These amounts have been excluded from this table because we cannot estimate the years in which these liabilities may be settled. See “NOTE 14:
INCOME TAXES” 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 within our consolidated financial statements. 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) fair value measurements; (b) allowances for loan losses and
reserve for guarantee losses; (c) impairment recognition on investments in securities; and (d) 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.”
Fair Value Measurements
Assets and liabilities within our consolidated financial statements measured at fair value include: (a) mortgage-related
and non-mortgage related securities; (b) mortgage loans held-for-sale; (c) derivative instruments; (d) debt securities
denominated in foreign currencies and certain other debt; and (e) REO. The measurement of fair value requires management
to make judgments and assumptions. These judgments and assumptions may have a significant effect on our measurements
of fair value, and the use of different judgments and assumptions, as well as changes in market conditions, could have a
material effect on our consolidated statements of operations as well as our consolidated fair value balance sheets. For
information regarding our fair value methods and assumptions, see “NOTE 20: FAIR VALUE DISCLOSURES.”
The accounting standards for fair value measurements and disclosures also establish a fair value hierarchy that
prioritizes the inputs to valuation techniques used to measure fair value based on the inputs a market participant would use at
the measurement date. For certain categories of assets, the valuation technique relies on significant unobservable inputs. The
process for determining fair value using unobservable inputs is generally more subjective and involves a high degree of
management judgment and assumptions. See “FAIR VALUE MEASUREMENTS AND ANALYSIS” for additional
information regarding fair value hierarchy and measurements.
Fair value affects our statements of operations in the following ways:
• For certain financial instruments that are recorded in the consolidated balance sheets at fair value, changes in fair
value are recognized in current period earnings. These include:
— mortgage-related and non-mortgage-related securities classified as trading, which are recorded in other gains
(losses) on investment securities recognized in earnings;
160 Freddie Mac