Fannie Mae 2004 Annual Report Download - page 259

The following table summarizes the impact of the restatement adjustments on net income available to common
stockholders and basic and diluted earnings per share for the years ended December 31, 2003 and 2002.
2003 2002
For the Year Ended
December 31,
(Dollars in millions,
except per share
data)
Net income available to common stockholders, as previously reported . . . . . . . . . . . . . . . . $ 7,755 $ 4,508
Restatement adjustments for:
Debt and derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,356 (5,877)
Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,826) 5,387
Investments in securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (332) (715)
MBS trust consolidation and sale accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (226) (59)
Financial guaranties and master servicing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175 178
Amortization of cost basis adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,348) 135
Other adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (926) (343)
Total impact of restatement adjustments before federal income taxes, extraordinary gains
(losses) and cumulative effect of change in accounting principle . . . . . . . . . . . . . . . . . . (127) (1,294)
Benefit for federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (259) (589)
Extraordinary gains, net of tax effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195 —
Cumulative effect of a change in accounting principle, net of tax effect . . . . . . . . . . . . . (151) —
Total impact of restatement adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 (705)
Net income available to common stockholders, as restated . . . . . . . . . . . . . . . . . . . . . . . . $ 7,931 $ 3,803
Basic earnings per share:
As previously reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7.93 $ 4.54
Total impact of restatement adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.19 (0.71)
As restated. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8.12 $ 3.83
Diluted earnings per share:
As previously reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7.91 $ 4.52
Total impact of restatement adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.17 (0.71)
As restated. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8.08 $ 3.81
See the “Financial Statement Impact” section below for further details on the impact of the restatement
adjustments in the consolidated financial statements for the restatement periods.
Debt and Derivatives
We identified five errors associated with our debt and derivatives. The most significant error was that we
incorrectly designated derivatives as cash flow or fair value hedges for accounting and reporting purposes. For
derivatives designated as cash flow hedges, this error resulted in the recognition of changes in the fair value of
these derivatives in “Accumulated other comprehensive income” (“AOCI”) in the consolidated balance sheets
instead of in the consolidated statements of income. For derivatives designated as fair value hedges, this error
resulted in the recognition of changes in the fair value of the hedged items as fair value adjustments in the
consolidated balance sheets and as gain or loss in the consolidated statements of income. In conjunction with
the review of these transactions, we identified the following additional errors associated with our debt and
derivatives: we incorrectly excluded foreign exchange derivatives from netting adjustments for transactions
executed with the same counterparty; we did not record a small number of financial instruments as derivatives;
F-8
FANNIE MAE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)