Fannie Mae 2004 Annual Report Download - page 79

Table 1: Cumulative Impact of Restatement
Periods
Prior to
January 1,
2002
Year Ended
December 31,
2002
Year Ended
December 31,
2003
Cumulative
Adjustments
as of
December 31,
2003
Six Months
Ended
June 30,
2004
Cumulative
Adjustments as
of June 30,
2004
Restatement Adjustments for:
(Dollars in millions)
Retained earnings, as previously
reported. . . . . . . . . . . . . . . . . . . . . . . $ 26,175 $29,385 $35,496 $ 37,414
Restatement adjustments for:
Debt and derivatives . . . . . . . . . . . . (10,622) (5,877) 4,356 $(12,143) $3,036 (9,107)
Commitments . . . . . . . . . . . . . . . . . 413 5,387 (1,826) 3,974 (546) 3,428
Investments in securities . . . . . . . . . (660) (715) (332) (1,707) (142) (1,849)
MBS trust consolidation and sale
accounting . . . . . . . . . . . . . . . . . 119 (59) (226) (166) (185) (351)
Financial guaranties and master
servicing. . . . . . . . . . . . . . . . . . . (206) 178 175 147 (143) 4
Amortization of cost basis
adjustments . . . . . . . . . . . . . . . . . 154 135 (1,348) (1,059) (70) (1,129)
Other adjustments . . . . . . . . . . . . . . 296 (343) (926) (973) (320) (1,293)
Total impact of restatement adjustments
before federal income taxes,
extraordinary gains (losses) and
cumulative effect of change in
accounting principle . . . . . . . . . . . . . . (10,506) (1,294) (127) (11,927) 1,630 (10,297)
(Benefit) provision for federal income
taxes . . . . . . . . . . . . . . . . . . . . . . . . . (3,465) (589) (259) (4,313) 397 (3,916)
Extraordinary gains (losses), net of tax
effect . . . . . . . . . . . . . . . . . . . . . . . . — — 195 195 7 202
Cumulative effect of a change in
accounting principle, net of tax effect . . — — (151) (151) — (151)
Impact of current period restatement
adjustments, except where cumulative . . (7,041) (705) 176 $ (7,570) $1,240 (6,330)
Impact of prior period restatement and
other stockholders’ equity
adjustments
(1)
. . . . . . . . . . . . . . . . . . . (7,042) (7,749) (5)
Retained earnings, as restated . . . . . . . . . $ 19,134 $21,638 $27,923 $ 31,079
(1)
Includes the impact of stock-based compensation dividend adjustments.
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 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
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