Sallie Mae 2013 Annual Report Download - page 160

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Significant Accounting Policies (Continued)
We recognize late fees on third-party serviced loans as well as on loans in our portfolio according to the
contractual provisions of the promissory notes, as well as our expectation of collectability.
We provide a full complement of administrative services to FFELP Guarantors including account
maintenance for Guarantor agencies. The fees associated with these services are recognized as the services are
performed based on contractually determined rates.
Contingency Revenue
We receive fees for collections of delinquent debt on behalf of clients performed on a contingency basis.
Revenue is earned and recognized upon receipt of the delinquent customer funds.
We also receive fees from Guarantor agencies for performing default aversion services on delinquent loans
prior to default. The fee is received when the loan is initially placed with us and we are obligated to provide such
services for the remaining life of the loan for no additional fee. In the event that the loan defaults, we are
obligated to rebate a portion of the fee to the Guarantor agency in proportion to the principal and interest
outstanding when the loan defaults. We recognize fees received, net of an estimate of future rebates owed due to
subsequent defaults, over the service period which is estimated to be the life of the loan.
Other Income
Our Upromise subsidiary has a number of programs that encourage consumers to save for the cost of college
education. We have established a consumer savings network which is designed to promote college savings by
consumers who are members of this program who generate rewards when they purchase goods and services from
the companies that participate in the program (“Participating Companies”). Participating Companies generally
pay Upromise fees based on member purchase volume, either online or in stores depending on the contractual
arrangement with the Participating Company. We recognize revenue as marketing and administrative services are
rendered based upon contractually determined rates and member purchase volumes.
Goodwill and Acquired Intangible Assets
We account for goodwill and acquired intangible assets in accordance with the applicable accounting
guidance. Under this guidance goodwill is not amortized but is tested periodically for impairment. We test
goodwill for impairment annually as of October 1 at the reporting unit level, which is the same as or one level
below a business segment. Goodwill is also tested at interim periods if an event occurs or circumstances change
that would indicate the carrying amount may be impaired.
We assess qualitative factors to determine whether it is “more-likely-than-not” that the fair value of a reporting
unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step
goodwill impairment test. The “more-likely-than-not” threshold is defined as having a likelihood of more than 50
percent. If, after assessing relevant qualitative factors, we conclude that it is “more-likely-than-not” that the fair
value of a reporting unit as of October 1 is less than its carrying amount, we will complete Step 1 of the goodwill
impairment analysis. Step 1 consists of a comparison of the fair value of the reporting unit to the reporting unit’s
carrying value, including goodwill. If the carrying value of the reporting unit exceeds the fair value, Step 2 in the
goodwill impairment analysis is performed to measure the amount of impairment loss, if any. Step 2 of the goodwill
impairment analysis compares the implied fair value of the reporting unit’s goodwill to the carrying value of the
reporting unit’s goodwill. The implied fair value of goodwill is determined in a manner consistent with determining
goodwill in a business combination. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair
value of the goodwill, an impairment loss is recognized in an amount equal to that excess.
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