Fannie Mae 2009 Annual Report Download - page 293

present fees received and costs incurred related to our structuring of securities in “Fee and other income” in
our consolidated statements of operations.
Income Taxes
We recognize deferred tax assets and liabilities for the difference in the basis of assets and liabilities for
financial accounting and tax purposes. We measure deferred tax assets and liabilities using enacted tax rates
that are expected to be applicable to the taxable income or deductions in the period(s) the assets are realized
or the liabilities are settled. We adjust deferred tax assets and liabilities for the effects of changes in tax laws
and rates on the date of enactment. We recognize investment and other tax credits through our effective tax
rate calculation assuming that we will be able to realize the full benefit of the credits. We reduce our deferred
tax asset by an allowance if, based on the weight of available positive and negative evidence, it is more likely
than not that we will not realize some portion, or all, of the deferred tax asset.
We account for income tax uncertainty using a two-step approach whereby we recognize an income tax
benefit if, based on the technical merits of a tax position, it is more likely than not (a probability of greater
than 50%) that the tax position would be sustained upon examination by the taxing authority, which includes
all related appeals and litigation. We then recognize a tax benefit equal to the largest amount of tax benefit
that is greater than 50% likely to be realized upon settlement with the taxing authority, considering all
information available at the reporting date. We recognize interest expense on unrecognized tax benefits as
“Other expenses” in our consolidated statements of operations.
Stock-Based Compensation
We measure the cost of employee services received in exchange for stock-based awards using the fair value of
those awards on the grant date. We recognize compensation cost over the period during which an employee is
required to provide service in exchange for a stock-based award, which is generally the vesting period. We
recognize compensation cost for retirement-eligible employees immediately, and for those employees who are
nearing retirement, over the shorter of the vesting period or the period from the grant date to the date of
retirement eligibility.
Pension and Other Postretirement Benefits
We provide pension and postretirement benefits and account for these benefit costs on an accrual basis. We
determine pension and postretirement benefit amounts recognized in our consolidated financial statements on
an actuarial basis using several different assumptions. The two most significant assumptions used in the
valuation are the discount rate and the long-term rate of return on assets. In determining our net periodic
benefit cost, we apply a discount rate in the actuarial valuation of our pension and postretirement benefit
obligations. In determining the discount rate as of each balance sheet date, we consider the current yields on
high-quality, corporate fixed-income debt instruments with maturities corresponding to the expected duration
of our benefit obligations. Additionally, the net periodic benefit cost recognized in our consolidated financial
statements for our qualified pension plan is impacted by the long-term rate of return on plan assets. We base
our assumption of the long-term rate of return on the current investment portfolio mix, actual long-term
historical return information and the estimated future long-term investment returns for each class of assets. We
measure plan assets and obligations as of the date of our consolidated financial statements. We recognize the
over-funded or under-funded status of our benefit plans as a prepaid benefit cost (an asset) in “Other assets” or
an accrued benefit cost (a liability) in “Other liabilities,” respectively, in our consolidated balance sheets. We
recognize actuarial gains and losses and prior service costs and credits when incurred as adjustments to the
prepaid benefit cost or accrued benefit cost with a corresponding offset in other comprehensive income (loss).
F-35
FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)