Sallie Mae 2007 Annual Report Download - page 143

2. Significant Accounting Policies (Continued)
differences between when principal and interest is collected on the trust assets and when principal and interest
is paid on the trust liabilities. As such, changes in this balance are reflected in investing activities.
Reclassifications
Certain reclassifications have been made to the balances as of and for the years ended December 31,
2006 and 2005, to be consistent with classifications adopted for 2007.
Recently Issued Accounting Pronouncements
Accounting for Servicing of Financial Assets
In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets,” which
amends SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities.” This statement was effective for the Company beginning January 1, 2007.
This statement:
• Requires an entity to recognize a servicing asset or liability each time it undertakes an obligation to
service a financial asset as the result of i) a transfer of the servicer’s financial assets that meet the
requirement for sale accounting; ii) a transfer of the servicer’s financial assets to a qualifying special-
purpose entity in a guaranteed mortgage securitization in which the transferor retains all of the resulting
securities and classifies them as either available-for-sale or trading securities in accordance with
SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities”; or iii) an
acquisition or assumption of an obligation to service a financial asset that does not relate to financial
assets of the servicer or its consolidated affiliates.
• Requires all separately recognized servicing assets or liabilities to be initially measured at fair value, if
practicable.
• Permits an entity to either i) amortize servicing assets or liabilities in proportion to and over the period
of estimated net servicing income or loss and assess servicing assets or liabilities for impairment or
increased obligation based on fair value at each reporting date (amortization method); or ii) measure
servicing assets or liabilities at fair value at each reporting date and report changes in fair value in
earnings in the period in which the changes occur (fair value measurement method). The method must
be chosen for each separately recognized class of servicing asset or liability.
• At its initial adoption, permits a one-time reclassification of available-for-sale securities to trading
securities by entities with recognized servicing rights, without calling into question the treatment of
other available-for-sale securities under SFAS No. 115, provided that the available-for-sale securities
are identified in some manner as offsetting the entity’s exposure to changes in fair value of servicing
assets or liabilities that a servicer elects to subsequently measure at fair value.
• Requires separate presentation of servicing assets and liabilities subsequently measured at fair value in
the statement of financial position and additional disclosures for all separately recognized servicing
assets and liabilities.
The adoption of SFAS No. 156 did not have a material impact on the Company’s financial statements as
the Company did not elect to carry its servicing rights at fair value through earnings.
F-22
SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts, unless otherwise stated)