Freddie Mac 2008 Annual Report Download - page 256

interest rates, change. Over the longer-term, Segment Earnings and GAAP-basis income both capture the aggregate cash
flows associated with our guarantee-related activities. Although Segment Earnings differs significantly from, and should not
be used as a substitute for GAAP-basis income, we believe that excluding the impact of changes in the fair value of expected
future cash flows from our Segment Earnings provides a meaningful measure of performance for a given period as well as
trends in performance over multiple periods because it more closely aligns with how we manage and evaluate the
performance of the credit guarantee business.
Table 16.1 reconciles Segment Earnings to GAAP net income (loss).
Table 16.1 — Reconciliation of Segment Earnings to GAAP Net Income (Loss)
2008 2007 2006
Year Ended December 31,
(in millions)
Segment Earnings, net of taxes:
Investments.................................................................... $ (1,175) $ 2,028 $ 2,111
Single-family Guarantee . . . ........................................................ (9,318) (256) 1,289
Multifamily ................................................................... 364 398 434
All Other ..................................................................... 134 (103) 19
Total Segment Earnings (loss), net of taxes . . .......................................... (9,995) 2,067 3,853
Reconciliation to GAAP net income (loss):
Derivative- and foreign currency denominated debt-related adjustments . . . ........................ (13,219) (5,667) (2,371)
Credit guarantee-related adjustments . . ................................................. (3,928) (3,268) (201)
Investment sales, debt retirements and fair value-related adjustments ............................. (10,462) 987 231
Fully taxable-equivalent adjustments . . ................................................. (419) (388) (388)
Total pre-tax adjustments . ........................................................ (28,028) (8,336) (2,729)
Tax-related adjustments
(1)
.......................................................... (12,096) 3,175 1,203
Total reconciling items, net of taxes ................................................. (40,124) (5,161) (1,526)
GAAP net income (loss) . ........................................................ $(50,119) $(3,094) $ 2,327
(1) 2008 includes a non-cash charge related to the establishment of a partial valuation allowance against our net deferred tax assets of approximately
$22 billion that is not included in Segment Earnings.
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