Sallie Mae 2010 Annual Report Download - page 126

2. Significant Accounting Policies (Continued)
amortized. They are tested for impairment annually as of October 1 or at interim periods if an event occurs or
circumstances change that would indicate the carrying value of these assets may be impaired. The annual or interim
impairment test of indefinite-lived acquired intangible assets is based primarily on a discounted cash flow analysis.
Restructuring Activities
From time to time we implement plans to restructure our business. In conjunction with these restructuring
plans, involuntary benefit arrangements, disposal costs (including contract termination costs and other exit
costs), as well as certain other costs that are incremental and incurred as a direct result of our restructuring
plans, are classified as restructuring expenses in the accompanying consolidated statements of income.
We sponsor the SLM Corporation Employee Severance Plan (the “Severance Plan”) which provides
severance benefits in the event of termination of our full-time employees (with the exception of certain
specified levels of management) and part-time employees who work at least 24 hours per week. The Severance
Plan establishes specified benefits based on base salary, job level immediately preceding termination and years
of service upon termination of employment due to Involuntary Termination or a Job Abolishment, as defined
in the Severance Plan. The benefits payable under the Severance Plan relate to past service and they
accumulate and vest. Accordingly, we recognize severance costs to be paid pursuant to the Severance Plan
when payment of such benefits is probable and reasonably estimable. Such benefits, including severance pay
calculated based on the Severance Plan, medical and dental benefits, outplacement services and continuation
pay, have been incurred during the years ended December 31, 2010, 2009 and 2008, as a direct result of our
restructuring initiatives. Accordingly, such costs are classified as restructuring expenses in the accompanying
consolidated statements of income. See Note 14, “Restructuring Activities,” for further information regarding
our restructuring activities.
Contract termination costs are expensed at the earlier of (1) the contract termination date or (2) the cease
use date under the contract. Other exit costs are expensed as incurred and classified as restructuring expenses
if (1) the cost is incremental to and incurred as a direct result of planned restructuring activities, and (2) the
cost is not associated with or incurred to generate revenues subsequent to our consummation of the related
restructuring activities.
Software Development Costs
Certain direct development costs associated with internal-use software are capitalized, including external
direct costs of services and payroll costs for employees devoting time to the software projects. These costs are
included in other assets and are amortized over a period not to exceed five years beginning when the asset is
technologically feasible and substantially ready for use. Maintenance costs and research and development
costs relating to software to be sold or leased are expensed as incurred.
During the years ended December 31, 2010, 2009 and 2008, we capitalized $14 million, $16 million and
$23 million, respectively, in costs related to software development, and expensed $154 million, $138 million
and $120 million, respectively, related to routine maintenance, betterments and amortization. At December 31,
2010 and 2009, the unamortized balance of capitalized internally developed software included in other assets
was $44 million and $53 million, respectively. We amortize software development costs over three to five
years.
Accounting for Stock-Based Compensation
We recognize share-based compensation cost in our consolidated statements of income using the fair
value based method. Under this method we determine the fair value of the share based compensation at the
F-23
SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts, unless otherwise stated)