Fannie Mae 2004 Annual Report Download - page 99

Statement of Cash Flows Impact
The following table displays the impact of the restatement on the December 31, 2003 and 2002 consolidated
statements of cash flows.
Table 8: Impact of Restatement on Statements of Cash Flows for the Years Ended December 31, 2003 and 2002
As
Previously
Reported
Total
Restatement
Adjustments
As
Restated
As
Previously
Reported
Total
Restatement
Adjustments
As
Restated
For the Year Ended December 31, 2003 For the Year Ended December 31, 2002
(Dollars in millions)
Net cash flows provided by operating
activities . . . . . . . . . . . . . . . . . . . . $ 19,519 $ 38,704 $ 58,223 $ 12,848 $ 30,783 $ 43,631
Net cash flows used in investing
activities . . . . . . . . . . . . . . . . . . . . (115,801) (36,946) (152,747) (71,426) (42,162) (113,588)
Net cash flows provided by financing
activities . . . . . . . . . . . . . . . . . . . . 95,987 206 96,193 58,770 11,868 70,638
Net increase (decrease) in cash and
cash equivalents . . . . . . . . . . . . . . . $ (295) $ 1,964 $ 1,669 $ 192 $ 489 $ 681
Cash and cash equivalents at beginning
of the period . . . . . . . . . . . . . . . . . 1,710 16 1,726 1,518 (473) 1,045
Cash and cash equivalents at end of the
period . . . . . . . . . . . . . . . . . . . . . . $ 1,415 $ 1,980 $ 3,395 $ 1,710 $ 16 $ 1,726
The restatement adjustments resulted in a net increase in “Cash and cash equivalents” of $2.0 billion and
$489 million during the years ended December 31, 2003 and 2002, respectively. The restatement adjustment to
increase cash and cash equivalents was the result of recognizing cash collateral associated with certain
derivatives contracts, which was partially offset by classifying cash due to certain MBS trusts as restricted
cash.
These restatement adjustments and errors in the prior cash flow presentation resulted in a net increase of
$38.7 billion in cash flows from operating activities, a net decrease of $36.9 billion in cash flows from
investing activities and a net increase of $206 million in cash flows from financing activities for the year
ended December 31, 2003. The primary causes of these changes were misclassifications of cash flows related
to derivatives, trading securities and HFS loans, and an overstatement of cash flows from the sale of mortgage
loans. In connection with the misapplication of hedge accounting, we incorrectly classified derivatives cash
flows as investing and financing activities instead of as operating activities. We determined that we misapplied
SFAS No. 102, Statement of Cash Flows—Exemption of Certain Enterprises and Classification of Cash Flows
from Certain Securities Acquired for Resale (an amendment to FASB Statement No. 95), which requires cash
flows from trading securities and HFS loans to be classified as operating cash flows. As previously discussed,
we incorrectly recorded sales of mortgage loans to MBS trusts that did not meet the definition of a QSPE
under SFAS 140, which resulted in a net overall increase in cash flows from investing activities.
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