Fannie Mae 2009 Annual Report Download - page 146

the new consolidation model, which changes the method of analyzing which party to a VIE should consolidate
the VIE.
The adoption of these new accounting standards will have a significant impact on the presentation of our
consolidated financial statements beginning in 2010. Because the concept of a QSPE is eliminated, our
existing QSPEs, primarily our MBS trusts, are subject to the new consolidation standards. Based on our
analysis, we are required to consolidate the substantial majority of our MBS trusts and record the underlying
assets (typically mortgage loans) and debt (typically bonds issued by the trusts in the form of Fannie Mae
MBS certificates) of these trusts as assets and liabilities in our consolidated balance sheet. As indicated in
Table 39 above, the substantial majority of the underlying assets and debt of these trusts are not recorded in
our consolidated balance sheet as of December 31, 2009. Consequently, the consolidation of these MBS trusts
onto our balance sheet will significantly increase the amount of our assets and liabilities. We initially recorded
the assets and liabilities of the substantial majority of our existing outstanding MBS trusts that we were
required to consolidate effective January 1, 2010 based on the unpaid principal balance as of that date. The
unpaid principal balance amounts we consolidated related to MBS trusts increased both our total assets and
total liabilities by approximately $2.4 trillion effective January 1, 2010.
In addition, consolidation of these MBS trusts will result in other changes to our consolidated financial
statements. The most significant changes are:
Financial Statement Accounting and Presentation Changes
Balance Sheet • Significant increase in loans and debt and significant
decrease in trading and available-for-sale securities
• Separate presentation of the elements of the consolidated
MBS trusts (such as mortgage loans, debt, accrued
interest receivable and payable) on the face of the
balance sheet
• Reclassification of substantially all of the previously
recorded reserve for guaranty losses to allowance for
loan losses
• Elimination of substantially all previously recorded
guaranty assets and guaranty obligations
Statement of Operations • Significant increase in interest income and interest
expense attributable to the consolidated assets and
liabilities of the consolidated MBS trusts
• Decrease to provision for credit losses and a
corresponding decrease in net interest income due to
recording interest expense on consolidated MBS trusts
when we are not accruing interest on underlying
nonperforming consolidated loans
• Separate presentation of the elements of the MBS trusts
(interest income and interest expense) on the face of the
statement of operations
• Reclassification of the substantial majority of guaranty
fee income and trust management income to interest
income
• Elimination of fair value losses on credit-impaired loans
acquired from the MBS trusts we have consolidated, as
the underlying loans in our MBS trusts will be recorded
in our consolidated balance sheet
Statement of Cash Flows • Significant change in the amounts of cash flows from
investing and financing activities
Although these new accounting standards do not change the economic risk to our business, specifically our
exposure to liquidity, credit, and interest rate risks, the transition adjustment recorded to accumulated deficit as
of January 1, 2010 to reflect the cumulative effect of adopting these new standards will affect our net worth.
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