Freddie Mac 2014 Annual Report Download - page 139

134 Freddie Mac
Table 60 — Contractual Obligations by Year at December 31, 2014
Total 2015 2016 2017 2018 2019 Thereafter
(in millions)
Long-term debt(1) $ 319,359 $ 58,841 $ 72,503 $ 77,482 $ 30,850 $ 30,671 $ 49,012
Short-term debt(1) 134,670 134,670 — — — — —
Interest payable(2) 34,124 11,498 4,927 3,535 2,261 1,849 10,054
Other liabilities reflected on our
consolidated balance sheet:
Other contractual liabilities(3)(4) 1,756 935 10 8 7 6 790
Purchase obligations:
Purchase commitments(5) 19,764 19,764 — — — — —
Other purchase obligations(6) 407 119 59 52 50 47 80
Operating lease obligations 29 9 7 4 3 3 3
Total specified contractual obligations $ 510,109 $ 225,836 $ 77,506 $ 81,081 $ 33,171 $ 32,576 $ 59,939
(1) Represents par value. Callable debt is included in this table at its contractual maturity. For additional information about our debt, see “NOTE 8: 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.
(3) Includes obligations related to our qualified and non-qualified defined contribution plans, retiree medical plan, and other benefit plans.
(4) Other contractual liabilities include 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.
(5) Purchase commitments represent our obligations to purchase mortgage loans and mortgage-related securities from third parties, most of which are
accounted for as derivatives in accordance with the accounting guidance for derivatives and hedging.
(6) Primarily includes unconditional purchase obligations that are legally binding and that are subject to a cancellation penalty.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in accordance 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) the single-family allowance for loan losses; (b) fair value
measurements; (c) impairment recognition on investments in securities; and (d) our ability to realize net deferred tax assets. For
additional information about our critical accounting policies and estimates and other significant accounting policies, as well as
recently issued accounting guidance, see “NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.”
Single-Family Allowance for Loan Losses
The single-family allowance for loan losses represents an estimate of probable incurred credit losses. The single-family
allowance for loan losses pertains to all single-family loans classified as held-for-investment on our consolidated balance
sheets.
Determining the appropriateness of the single-family allowance for loan loss reserves is a complex process that is subject
to numerous estimates and assumptions requiring significant management judgment about matters that involve a high degree of
subjectivity. This process involves the use of models that require us to make judgments about matters that are difficult to
predict, the most significant of which are the probability of default and loss severity. We regularly evaluate the underlying
estimates and models we use when determining the single-family allowance for loan losses and update our assumptions to
reflect our historical experience and current view of economic factors. See “RISK FACTORS — Operational Risks — We face
risks and uncertainties associated with the models that we use for financial accounting and reporting purposes, to make
business decisions, and to manage risks. Market conditions have raised these risks and uncertainties.”
We believe the level of our single-family allowance for loan losses is appropriate based on internal reviews of the factors
and methodologies used. No single statistic or measurement determines the appropriateness of the loan loss reserves. Changes
in one or more of the estimates or assumptions used to calculate the single-family allowance for loan losses could have a
material impact on the loan loss reserves and provision for credit losses.
Most single-family loans are aggregated into pools based on similar risk characteristics and measured collectively using a
statistically based model that evaluates a variety of factors affecting collectability, including but not limited to: (a) estimated
current LTV ratios; (b) loan product type; (c) delinquency/default status and history; and (d) geographic location. Inputs used
by the model are regularly updated for changes in the underlying data, assumptions, and market conditions. We consider the
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