Fannie Mae 2004 Annual Report Download - page 92

appropriately consider security characteristics and aggregation in developing our estimate of fair value.
Correcting these errors resulted in a reduction in the fair value of these assets of approximately $800 million
(net of tax) as of December 31, 2003, which was primarily due to changes in the estimated fair values of
mortgage revenue bonds and REMICs. For our debt, we did not appropriately exclude certain commission
costs associated with the issuance of new debt securities in creating the yield curve we used for estimating fair
value. Correcting this error resulted in an increase in the estimated fair value of our debt of approximately
$300 million (net of tax) as of December 31, 2003. For our out-of-the-money derivative options, we did not
fully incorporate available market information that differentiates at-the-money volatilities from out-of-the-
money volatilities in estimating fair value. Correcting the error resulted in a decrease in the estimated fair
value of our derivatives of approximately $200 million (net of tax) as of December 31, 2003. To correct these
errors, we recalculated the fair value of these items using new assumptions, observable data and appropriate
levels of specificity. The impact of recalculating the estimated fair value of these items is reflected in “Notes
to Consolidated Financial Statements — Note 19, Fair Value of Financial Instruments.”
Financial Statement Impact
The following tables display the net impact of restatement adjustments in the previously issued consolidated
balance sheets, consolidated statements of income, consolidated statements of cash flows and regulatory capital
for 2003 and 2002. In addition, we have included tables displaying the net impact of restatement adjustments
on stockholders’ equity and in the consolidated balance sheet as of December 31, 2001. The following
consolidated financial statements are presented in a condensed format.
Balance Sheet Impact
The following table displays the cumulative impact of the restatement on the condensed consolidated balance
sheet through and as of December 31, 2003.
Table 2: Balance Sheet Impact of Restatement as of December 31, 2003
As
Previously
Reported
(a)
Debt and
Derivatives Commitments
Investments
in Securities
MBS Trust
Consolidation
and Sale
Accounting
Financial
Guaranties
and Master
Servicing
Amortization
of Cost
Basis
Adjustments
Other
Adjustments
Total
Restatement
Adjustments
As
Restated
Restatement Adjustments for:
(Dollars in millions)
Assets:
Investments in securities . . . . . . . . . $ 712,763 $ — $ 3,479 $ 5,458 $(153,971) $ — $(401) $ (258) $(145,693)
(b)
$ 567,070
Mortgage loans . . . . . . . . . . . . . 240,844 — 874 115 162,780 — (519) (5,033) 158,217
(c)
399,061
Derivative assets at fair value . . . . . . 8,191 (1,014) 8 — — — — 33 (973)
(d)
7,218
Guaranty assets . . . . . . . . . . . . . 5,666 — — — (200) (1,184) — — (1,384)
(e)
4,282
Deferred tax assets . . . . . . . . . . . . 9,142 (2,221) (2,613) (646) (175) (106) 332 369 (5,060)
(f)
4,082
Other assets . . . . . . . . . . . . . . . 32,963 (1,760) 3,097 (3,685) 487 (411) 10 9,861 7,599
(g)
40,562
Total assets . . . . . . . . . . . . . . $1,009,569 $ (4,995) $ 4,845 $ 1,242 $ 8,921 $(1,701) $(578) $ 4,972 $ 12,706 $1,022,275
Liabilities and Stockholders’ Equity
Liabilities:
Debt . . . . . . . . . . . . . . . . . . . $ 958,064 $ (6,748) $ — $ — $ 9,906 $ — $ — $ 58 $ 3,216
(h)
$ 961,280
Derivative liabilities at fair value . . . . 1,600 1,632 (7) — — — — — 1,625
(d)
3,225
Guaranty obligations . . . . . . . . . . . 5,666 — — — (796) 1,531 — — 735
(i)
6,401
Other liabilities . . . . . . . . . . . . . 21,815 (4,002) (1) 37 (507) (3,442) 39 5,157 (2,719)
(j)
19,096
Total liabilities . . . . . . . . . . . . 987,145 (9,118) (8) 37 8,603 (1,911) 39 5,215 2,857 990,002
Minority interests in consolidated
subsidiaries . . . . . . . . . . . . . . . . 51 — — — — — — (46) (46) 5
Stockholders’ Equity:
Retained earnings . . . . . . . . . . . . 35,496 (8,079) 2,399 (1,106) 118 101 (688) (318) (7,573)
(k)
27,923
Accumulated other comprehensive
income (loss) . . . . . . . . . . . . . (12,032) 12,202 2,454 2,311 200 109 71 — 17,347
(l)
5,315
Other stockholders’ equity . . . . . . . . (1,091) — — — — — — 121 121 (970)
Total stockholders’ equity . . . . . . . 22,373 4,123 4,853 1,205 318 210 (617) (197) 9,895 32,268
Total liabilities and stockholders’
equity . . . . . . . . . . . . . . . . . . . $1,009,569 $ (4,995) $ 4,845 $ 1,242 $ 8,921 $(1,701) $(578) $ 4,972 $ 12,706 $1,022,275
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