Fannie Mae 2010 Annual Report Download - page 342

Deferred Tax Assets and Liabilities
The following table displays our deferred tax assets, deferred tax liabilities, and valuation allowance as of
December 31, 2010 and 2009.
2010 2009
As of December 31,
(Dollars in millions)
Deferred tax assets:
(1)
Allowance for loan losses and basis in acquired property, net . . . . . . . . . . . . . . . . . . . $ 27,063 $ 23,615
Mortgage and mortgage-related assets, including acquired credit-impaired loans . . . . . . 10,825 10,547
Debt and derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,627 8,255
Partnership credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,500 3,587
Partnership and other equity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,175 2,411
Unrealized losses on AFS securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 772 927
Net operating loss and alternative minimum tax credit carryforwards. . . . . . . . . . . . . . 3,341 688
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,818 3,661
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,121 53,691
Deferred tax liabilities:
Other,net....................................................... 53 45
Total deferred tax liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 45
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (56,314) (52,737)
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 754 $ 909
(1)
Certain prior year amounts have been reclassified to conform to the current year presentation.
We recognize deferred tax assets and liabilities for the future tax consequences related to differences between
the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for
net operating loss and tax credit carryforwards. We recorded an increase in our valuation allowance in 2010
that resulted in the recognition of $5.9 billion in our provision for income taxes. This amount represented the
tax effect associated with a portion of our pre-tax loss. The change in our 2010 valuation allowance also
includes a $2.4 billion reduction primarily due to our adoption of the new accounting standards for amounts
originally recognized in “Accumulated deficit.” Our deferred tax assets, net of a valuation allowance, totaled
$754 million and $909 million as of December 31, 2010 and 2009, respectively. We evaluate our deferred tax
assets for recoverability using a consistent approach which considers the relative impact of both negative and
positive evidence, including our historical profitability and projections of future taxable income. We are
required to establish a valuation allowance for deferred tax assets and record a charge in our consolidated
statements of operations or in “Fannie Mae stockholders’ deficit” if we determine, based on available evidence
at the time the determination is made, that it is more likely than not that some portion or all of the deferred
tax assets will not be realized. In evaluating the need for a valuation allowance, we estimate future taxable
income or loss based on management-approved business plans and ongoing tax planning strategies. This
process involves significant management judgment about assumptions that are subject to change from period
to period based on changes in tax laws or variances between our projected operating performance, our actual
results and other factors.
We are in a cumulative book taxable loss position and have been for more than a three-year period. For
purposes of establishing a deferred tax valuation allowance, this cumulative book taxable loss position is
considered significant, objective evidence that we may not be able to realize some portion of our deferred tax
F-84
FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)