Sallie Mae 2006 Annual Report Download - page 140

2. Significant Accounting Policies (Continued)
for the expected future tax consequences of temporary differences between the carrying amounts and tax basis
of the Company’s assets and liabilities. To the extent tax laws change, deferred tax assets and liabilities are
adjusted in the period that the tax change is enacted.
“Income tax expense” includes (i) deferred tax expense, which represents the net change in the deferred
tax asset or liability balance during the year plus any change in a valuation allowance, and (ii) current tax
expense, which represents the amount of tax currently payable to or receivable from a tax authority plus
amounts accrued for expected tax deficiencies (including both tax, interest, and penalties). Income tax expense
excludes the tax effects related to adjustments recorded in equity.
In accordance with SFAS No. 5, “Accounting for Contingencies,” the Company records a reserve for
expected contingencies with the Internal Revenue Service and various state taxing authorities when it is
deemed that deficiencies arising from such contingencies are probable and reasonably estimable. This reserve
includes both tax and interest on these deficiencies.
Minority Interest in Subsidiaries
At December 31, 2006 and 2005, minority interest in subsidiaries represents interests held by minority
shareholders in AFS Holdings, LLC, of approximately 12 percent and 24 percent, respectively.
Earnings per Common Share
The Company computes earnings per common share (“EPS”) in accordance with SFAS No. 128,
“Earnings per Share.” See Note 15, “Earnings per Common Share,” for further discussion.
Reclassifications
Certain reclassifications have been made to the balances as of and for the years ended December 31,
2005 and 2004, to be consistent with classifications adopted for 2006.
Recently Issued Accounting Pronouncements
The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of
FASB Statement No. 115
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and
Financial Liabilities — Including an Amendment of FASB Statement No. 115”. This statement permits entities
to choose to measure many financial instruments and certain other items at fair value (on an instrument by
instrument basis) improving financial reporting by providing entities with the opportunity to mitigate volatility
in reported earnings caused by measuring related assets and liabilities differently without having to apply
complex hedge accounting provisions. Most recognized financial assets and liabilities are eligible items for the
measurement option established by the statement. There are a few exceptions, including an investment in a
subsidiary or an interest in a variable interest entity that is required to be consolidated, certain obligations
related to post-employment benefits, assets or liabilities recognized under leases, various deposits and financial
instruments classified as shareholder’s equity. A business entity shall report unrealized gains and losses on
items for which the fair value option has been elected in earnings at each reporting date. The Company is
currently evaluating the impact of this standard on its financial statements. The statement will be effective
beginning January 1, 2008.
F-21
SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts, unless otherwise stated)