Fannie Mae 2008 Annual Report Download - page 318

SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities
and FIN No. 46R, Consolidation of Variable Interest Entities
On September 15, 2008, the FASB issued an exposure draft of a proposed statement of financial accounting
standards, Amendments to FASB Interpretation No. 46(R), and an exposure draft of a proposed statement of
financial accounting standards, Accounting for Transfer of Financial Assets-an amendment of SFAS Statement
No. 140. The proposed amendments to SFAS 140 would eliminate qualifying special purpose entities
(“QSPEs”). Additionally, the amendments to FIN 46R would replace the current consolidation model with a
qualitative evaluation that requires consolidation of an entity when the reporting enterprise both (a) has the
power to direct matters which significantly impact the activities and success of the entity, and (b) has exposure
to benefits and/or losses that could potentially be significant to the entity. If an enterprise is not able to reach
a conclusion through the qualitative analysis, it would then proceed to a quantitative evaluation. The proposed
statements would be effective for new transfers of financial assets and to all variable interest entities on or
after January 1, 2010.
If we are required to consolidate the incremental assets and liabilities under the FASB’s currently proposed
rules, these assets and liabilities would initially be reported at fair value. If the fair value of the consolidated
assets is substantially less than the fair value of the consolidated liabilities, we could experience a material
increase in our stockholders’ deficit. However, at the FASB’s January 28, 2009 board meeting, a tentative
decision was reached that the incremental assets and liabilities to be consolidated upon adoption should be
recognized at their carrying values as if they had been consolidated at the inception of the entity or a
subsequent reconsideration date. The FASB board members indicated that fair value at consolidation would
only be permitted if determining the carrying value is not practicable. As a result of this tentative decision, we
could also experience an increase in our stockholders’ deficit. In addition, the amount of capital we would be
required to maintain could increase if we consolidate incremental assets and liabilities. Under certain
circumstances, these changes could have a material adverse impact on our earnings, financial condition and
net worth. Since the proposed amendments to SFAS 140 and FIN 46R are not final, we are unable to predict
the impact that the amendments may have on our consolidated financial statements.
FSP No. FAS 132R-1, Employers’ Disclosures about Postretirement Benefit Plan Assets (“FSP FAS 132R-1”)
In December 2008, the FASB issued FSP FAS 132R-1 that amends FASB Statement No. 132R, Employers’
Disclosures about Pension and Other Postretirement Benefits and requires more detailed disclosures about
employers’ plan assets, including employers’ investment strategies, major categories of plan assets,
concentrations of risk within plan assets, and valuation techniques used to measure the fair value of plan
assets. FSP FAS 132R-1 also requires the disclosure of fair value of plan assets at the reporting date by the
fair value hierarchy in SFAS 157 and a reconciliation of the beginning and ending balances of plan assets with
fair value measured using significant unobservable inputs (Level 3).
FSP FAS 132R-1 is effective for fiscal years ending after December 15, 2009. Early application is permitted.
As FSP FAS 132R-1 only requires additional footnote disclosures, it will affect the notes to our consolidated
financial statements, but have no impact to our consolidated financial statements.
3. Consolidations
We have interests in various entities that are considered to be VIEs, as defined by FIN 46R. These interests
include investments in securities issued by VIEs, such as Fannie Mae MBS created pursuant to our
securitization transactions, mortgage and asset-backed trusts that were not created by us, and limited
partnership interests in LIHTC and other housing partnerships that are established to finance the acquisition,
construction, development or rehabilitation of affordable multifamily and single-family housing. These
interests may also include our guaranty to the entity.
F-40
FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)