Freddie Mac 2010 Annual Report Download - page 72

CONSOLIDATED RESULTS OF OPERATIONS
The following discussion of our consolidated results of operations should be read in conjunction with our consolidated
financial statements, including the accompanying notes. Also see “CRITICAL ACCOUNTING POLICIES AND
ESTIMATES” for more information concerning our more significant accounting policies and estimates applied in
determining our reported results of operations.
Change in Accounting Principles
As discussed in “BUSINESS — Executive Summary,” our adoption of two new accounting standards that amended the
guidance applicable to the accounting for transfers of financial assets and the consolidation of VIEs had a significant impact
on our consolidated financial statements and other financial disclosures beginning in the first quarter of 2010.
The cumulative effect of these changes in accounting principles was a net decrease of $11.7 billion to total equity
(deficit) as of January 1, 2010, which included changes to the opening balances of retained earnings (accumulated deficit)
and AOCI. See “NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — Consolidation and Equity Method
of Accounting,” “NOTE 2: CHANGE IN ACCOUNTING PRINCIPLES,” “NOTE 4: VARIABLE INTEREST ENTITIES,”
and “NOTE 23: SELECTED FINANCIAL STATEMENT LINE ITEMS” for additional information regarding these changes.
As these changes in accounting principles were applied prospectively, our results of operations for the year ended
December 31, 2010 (on both a GAAP and Segment Earnings basis), which reflect the consolidation of trusts that issue our
single-family PCs and certain Other Guarantee Transactions, are not directly comparable with the results of operations for
the years ended December 31, 2009 and 2008, which reflect the accounting policies in effect during that time (i.e., when the
majority of the securitization entities were accounted for off-balance sheet).
Table 9 — Summary Consolidated Statements of Operations — GAAP Results
(1)
2010 2009 2008
Year Ended December 31,
(in millions)
Net interest income . . ............................................................ $16,856 $ 17,073 $ 6,796
Provision for credit losses .......................................................... (17,218) (29,530) (16,432)
Net interest income (loss) after provision for credit losses . . . ................................. (362) (12,457) (9,636)
Non-interest income (loss):
Gains (losses) on extinguishment of debt securities of consolidated trusts . . ...................... (164) — —
Gains (losses) on retirement of other debt ............................................. (219) (568) 209
Gains (losses) on debt recorded at fair value . . . ......................................... 580 (404) 406
Derivative gains (losses) . . . ...................................................... (8,085) (1,900) (14,954)
Impairment of available-for-sale securities:
(2)
Total other-than-temporary impairment of available-for-sale securities . . . ...................... (1,778) (23,125) (17,682)
Portion of other-than-temporary impairment recognized in AOCI ............................ (2,530) 11,928 —
Net impairment of available-for-sale securities recognized in earnings . ...................... (4,308) (11,197) (17,682)
Other gains (losses) on investment securities recognized in earnings............................ (1,252) 5,965 1,501
Other income. . . . . ............................................................ 1,860 5,372 1,345
Total non-interest income (loss) .................................................... (11,588) (2,732) (29,175)
Non-interest expense:
Administrative expenses . . . ...................................................... (1,546) (1,651) (1,505)
REO operations expense . . . ...................................................... (673) (307) (1,097)
Other expenses. . . . ............................................................ (713) (5,237) (3,151)
Total non-interest expense ...................................................... (2,932) (7,195) (5,753)
Loss before income tax benefit (expense) ............................................... (14,882) (22,384) (44,564)
Income tax benefit (expense) . . ...................................................... 856 830 (5,552)
Net loss . . . ................................................................... (14,026) (21,554) (50,116)
Less: Net (income) loss attributable to noncontrolling interest ................................ 1 1 (3)
Net loss attributable to Freddie Mac ................................................... $(14,025) $(21,553) $(50,119)
(1) See “NOTE 2: CHANGE IN ACCOUNTING PRINCIPLES” for information regarding accounting changes impacting the current period.
(2) We adopted an amendment to the accounting standards for investments in debt and equity securities effective April 1, 2009. See “NOTE 2: CHANGE
IN ACCOUNTING PRINCIPLES — Other Changes in Accounting Principles” for additional information regarding the impact of this amendment.
Net Interest Income
Table 10 summarizes our net interest income and net interest yield and provides an attribution of changes in annual
results to changes in interest rates or changes in volumes of our interest-earning assets and interest-bearing liabilities.
Average balance sheet information is presented because we believe end-of-period balances are not representative of activity
throughout the periods presented. For most components of the average balances, a daily weighted average balance was
calculated for the period. When daily weighted average balance information was not available, a simple monthly average
balance was calculated.
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