Sallie Mae 2010 Annual Report Download - page 201

19. Segment Reporting (Continued)
other items that management does not consider in evaluating our operating results. The following table reflects
aggregate adjustments associated with these areas for the years ended December 31, 2010, 2009, and 2008.
(Dollars in millions) 2010 2009 2008
Years Ended December 31,
“Core Earnings” adjustments to GAAP:
Net impact of derivative accounting
(1)
........................... $ 83 $(502) $(751)
Net impact of acquired intangibles
(2)
............................ (699) (76) (73)
Net impact of securitization accounting
(3)
......................... — (201) (442)
Net tax effect
(4)
............................................ 118 296 470
Total “Core Earnings” adjustments to GAAP ...................... $(498) $(483) $(796)
(1) Derivative accounting: “Core Earnings” exclude periodic unrealized gains and losses that are caused primarily by the
mark-to-market derivative valuations on derivatives that do not qualify for hedge accounting treatment under GAAP. These unre-
alized gains and losses occur in our FFELP Loans and Consumer Lending operating segments. In our “Core Earnings” presenta-
tion, we recognized the economic effect of these hedges, which generally results in any cash paid or received being recognized
ratably as an expense or revenue over the hedged item’s life.
(2) Goodwill and Acquired Intangibles: We exclude goodwill and intangible impairment and amortization of acquired intangibles.
(3) Securitization accounting: Under GAAP, prior to the adoption of the new consolidation accounting guidance on January 1,
2010, certain securitization transactions in our FFELP Loans operating segment were accounted for as sales of assets. Under
“Core Earnings” for the FFELP Loans operating segment, we presented all securitization transactions as long-term non-recourse
financings. The upfront “gains” on sale from securitization transactions, as well as ongoing “securitization servicing and Resid-
ual Interest revenue (loss)” presented in accordance with GAAP, were excluded from “Core Earnings” and were replaced by
interest income, provisions for loan losses, and interest expense as earned or incurred on the securitization loans. We also
excluded transactions with our off-balance sheet trusts from “Core Earnings” as they were considered intercompany transactions
on a “Core Earnings” basis. On January 1, 2010, upon the adoption of the new consolidation accounting guidance, which
resulted in the consolidation of these previously off-balance sheet securitization trusts, there are no longer differences between
our GAAP and “Core Earnings” presentation for securitization accounting.
(4) Net Tax Effect: Such tax effect is based upon our “Core Earnings” effective tax rate for the year.
20. Discontinued Operations
Our Purchased Paper businesses are presented in discontinued operations for the current and prior periods.
In the fourth quarter of 2009, we sold our Purchased Paper — Mortgage/Properties business for $280 million
which resulted in an after-tax loss of $95 million. As a result of this sale, the results of operations of this
business were required to be presented in discontinued operations beginning in the fourth quarter of 2009. In the
fourth quarter of 2010, we began actively marketing our Purchased Paper — Non Mortgage business for sale and
have concluded it is probable this business will be sold within one year and that we would have no continuing
involvement in this business after the sale. As a result, we have classified the business as held for sale, and, as
such, the results of operations of this business were required to be presented in discontinued operations
beginning in the fourth quarter of 2010. In connection with this classification, we are required to carry this
business at the lower of fair value or historical cost basis. This resulted in us recording an after-tax loss of
$52 million from discontinued operations in the fourth quarter of 2010, primarily due to adjusting the value of
this business to its estimated fair value.
The Purchased Paper — Mortgage/Properties business and the Purchased Paper — Non Mortgage business
comprises operations and cash flows that can be clearly distinguished operationally and for financial reporting
purposes, from the rest of the Company. Accordingly, this Component is presented as discontinued operations
as (1) the operations and cash flows of the Component have been eliminated from our ongoing operations as
of December 31, 2010, and (2) we will have no continuing involvement in the operations of this Component
subsequent to the sale of the Purchased Paper-Non Mortgage business.
F-98
SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts, unless otherwise stated)