Sallie Mae 2014 Annual Report Download - page 96

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
2. Significant Accounting Policies
Basis of Presentation
The financial reporting and accounting policies of SLM Corporation conform to generally accepted accounting principles
in the United States of America (“GAAP”). In conjunction with the Spin-Off, our consolidated financial statements are
comprised of financial information relating to the Bank and Upromise. We use “Private Education Loans” to mean education
loans to students or their families that are non-federal loans and loans not insured or guaranteed under the previously existing
Federal Family Education Loan Program (“FFELP”). Also included in our financial statements, for periods before the Spin-Off,
are certain general corporate overhead expenses allocated to the Company.
The timing and steps necessary to complete the Spin-Off and comply with the Securities and Exchange Commission
(“SEC”) reporting requirements, including the replacement of pre-Spin-Off SLM Corporation with our current publicly traded
registrant, have resulted in our Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC on
February 19, 2014, and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, filed with the SEC on May
12, 2014, providing business results and financial information for the periods reported therein on the basis of the consolidated
businesses of pre-Spin-Off SLM. While information contained in those prior reports may provide meaningful historical context
for our business, the Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 was our first periodic report made on
the basis of the post-Spin-Off business.
At the time of the Spin-Off, we had a targeted starting equity balance of $1,710 million. To achieve the targeted equity
balance we retained $565 million of preferred stock and approximately $473 million of cash to offset the obligations
attributable to the principal of Series A Preferred Stock and the Series B Preferred Stock, which are substantially similar in all
respects to pre-Spin-Off SLM's respective series of preferred stock.
For periods before the Spin-Off, these financial statements are presented on a basis of accounting that reflects a change in
reporting entity and have been adjusted for the effects of the Spin-Off. These carve-out financial statements and selected
financial information represent only those operations, assets, liabilities and equity that form Sallie Mae on a stand-alone basis.
Because the Spin-Off occurred on April 30, 2014, these financial statements include the carved out financial results for the first
four months of 2014. All prior period amounts represent comparably determined carved-out amounts.
Use of Estimates and Assumptions
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 the
valuation of allowance for loan losses, fair value measurements and derivative accounting.
Consolidation
The consolidated financial statements include the accounts of SLM Corporation and its majority-owned and controlled
subsidiaries after eliminating the effects of intercompany accounts and transactions.
Cash and Cash Equivalents
Cash and cash equivalents include cash held in the Federal Reserve Bank of San Francisco (“FRB”) and commercial bank
accounts, and other short-term liquid instruments with original maturities of three months or less. Fees associated with investing
cash and cash equivalents are amortized into interest income using the effective interest rate method.
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