Sallie Mae 2008 Annual Report Download - page 130

1. Organization and Business (Continued)
year and prior academic years under the regular FFEL program and the emergency programs established by
the Ensuring Continued Access to Student Loans Act of 2008.” The budget proposal must be passed in the
Congress, prior to enactment into law. The Company will work with Congress and ED to assist them in
achieving the objectives outlined in the Administration’s 2010 budget request.
2. Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of SLM Corporation and its subsidiaries, after
eliminating the effects of intercompany accounts and transactions.
Financial Interpretation (“FIN”) No. 46(R), “Consolidation of Variable Interest Entities,” requires Variable
Interest Entities (“VIEs”) to be consolidated by their primary beneficiaries. A VIE exists when either the total
equity investment at risk is not sufficient to permit the entity to finance its activities by itself, or the equity
investors lack one of three characteristics associated with owning a controlling financial interest. Those
characteristics are the direct or indirect ability to make decisions about an entity’s activities that have a
significant impact on the success of the entity, the obligation to absorb the expected losses of an entity, and
the rights to receive the expected residual returns of the entity.
As further discussed in Note 8, “Student Loan Securitization,” the Company does not consolidate any
qualifying special purpose entities (“QSPEs”) created for securitization purposes in accordance with
SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities — a Replacement of SFAS No. 125.” All of the Company’s off-balance sheet securitizations meet
the definition of a QSPE and are not consolidated. The Company’s accounting treatment for its on-balance
sheet securitizations, which are not QSPEs, are governed by FIN No. 46(R) and are consolidated in the
accompanying financial statements as the Company is the primary beneficiary.
Use of Estimates
The Company’s financial reporting and accounting policies conform to generally accepted accounting
principles in the United States of America (“GAAP”). The preparation of financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates. Key accounting policies that include significant judgments and estimates include
valuation and income recognition related to allowance for loan losses, loan effective interest rate method
(student loan premiums and discounts), fair value measurements, securitization activities (gain on sale and the
related retained interest), and derivative accounting.
Loans
Loans, consisting of federally insured student loans, Private Education Loans, student loan participations,
lines of credit, academic facilities financings, and other private consumer and mortgage loans that the
Company has the ability and intent to hold for the foreseeable future are classified as held for investment and
are carried at amortized cost. Amortized cost includes the unamortized premiums, discounts, and capitalized
origination costs and fees, all of which are amortized to interest income as further discussed below. Loans
which are held-for-investment also have an allowance for loan loss as needed. Any loans the Company has the
ability and intent to sell are classified as held for sale, and carried at the lower of cost or fair value. Loans
F-10
SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts, unless otherwise stated)