Fannie Mae 2004 Annual Report Download - page 117

(3)
Primarily includes upfront premiums paid on option contracts.
(4)
Primarily represents cash paid upon termination of derivative contracts.
(5)
Reflects net derivatives fair value losses recognized in the consolidated statements of income, excluding mortgage
commitments.
Amounts presented in Table 17 have the following effect on our consolidated financial statements:
• Cash payments made to purchase options (purchased options premiums) increase the derivative asset
recorded in the consolidated balance sheets.
• Cash payments to terminate and/or sell derivative contracts reduce the derivative liability recorded in the
consolidated balance sheets.
• Periodic interest payments on our interest rate swap contracts also reduce the derivative liability as we
accrue these amounts based on the contractual terms and recognize the accrual as an increase to the net
derivative liability recorded in the consolidated balance sheets. The corresponding offsetting amount is
recorded as expense and included as a component of derivatives fair value losses in the consolidated
statements of income.
• Changes in the estimated fair value of our derivatives that result in a loss are recorded as an increase to
the derivative liability or as a decrease to the derivative asset recorded in the consolidated balance sheets.
The corresponding offsetting amount is recorded as a component of derivatives fair value losses in the
consolidated statements of income.
• Changes in the estimated fair value of our derivatives that result in a gain are recorded as a decrease to
the derivative liability or as an increase to the derivative asset recorded in the consolidated balance sheets.
The corresponding offsetting amount is recorded as a component of derivatives fair value gains in the
consolidated statements of income.
Table 18 provides additional detail on the derivatives fair value gains and losses recognized in our consolidated
statements of income for 2004, 2003 and 2002 by type of derivative instrument. The 5-year interest rate swap
rate, which is shown below in Table 18 for each period, is a key reference interest rate affecting the estimated
fair value of these derivatives.
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