Sallie Mae 2005 Annual Report Download - page 143

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts, unless otherwise stated)
F-21
2. Significant Accounting Policies (Continued)
Reclassifications
Certain reclassifications have been made to the balances as of and for the years ended December 31,
2004 and 2003, to be consistent with classifications adopted for 2005.
Recently Issued Accounting Pronouncements
Accounting for Certain Hybrid Financial Instruments
In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial
Instruments” which amends SFAS No. 133 and SFAS No. 140. This statement will be effective for the first
fiscal year beginning after September 15, 2006.
This statement:
•Allows a hybrid financial instrument containing an embedded derivative that would have required
bifurcation under SFAS No. 133 to be measured at fair value as one instrument on a case by case
basis;
•Clarifies which interest-only strips and principal-only strips are exempt from the requirements of
SFAS No. 133;
•Requires that all interests in securitized financial assets be evaluated to determine if the interests
are free standing instruments or if the interests contain an embedded derivative;
•Clarifies that the concentrations of credit risk in the form of subordination are not an embedded
derivative; and
•Amends SFAS Statement No. 140 to eliminate the prohibition of a qualifying special purpose entity
from holding a derivative financial instrument that pertains to beneficial interests other than
another derivative financial instrument.
The Company is currently evaluating this statement to assess its impact on the Company’s financial
statements.
Accounting Changes and Error Corrections
In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections,” which is
a replacement of APB Opinion No. 20, “Accounting Changes,” and SFAS No. 3, “Reporting Accounting
Changes in Interim Financial Statements.” This statement changes the requirements for the accounting for
and reporting of a change in accounting principle. This statement applies to all voluntary changes in
accounting principle and applies to changes required by an accounting pronouncement in the unusual
instance that the pronouncement does not include specific transition provisions. This statement requires
retrospective application to prior periods’ financial statements of changes in accounting principle, unless it
is impracticable to determine either the period-specific effects or the cumulative effect of the change.
When it is impracticable to determine the period-specific effects of an accounting change on one or more
individual prior periods presented, this statement requires that the new accounting principle be applied to
the balances of assets and liabilities as of the beginning of the earliest period for which retrospective
application is practicable and that a corresponding adjustment be made to the opening balance of retained