Freddie Mac 2008 Annual Report Download - page 267

stockholders, including deferred taxes from our GAAP consolidated balance sheets, and our GAAP consolidated balance
sheets equity attributable to common stockholders. To the extent the adjusted deferred taxes are a net asset, this amount is
included in other assets. In addition, if our net deferred tax assets on our consolidated fair value balance sheet, calculated as
described above, exceeds our net deferred tax assets on our GAAP consolidated balance sheet that has been reduced by a
valuation allowance, our net deferred tax assets on our consolidated fair value balance sheet is limited to the amount of our
net deferred tax assets on our GAAP consolidated balance sheet. If the adjusted deferred taxes are a net liability, this amount
is included in other liabilities.
Total Debt, Net
Total debt, net represent short-term and long-term debt used to finance our assets. On our consolidated GAAP balance
sheets, total debt, net, excluding debt securities denominated in foreign currencies, are reported at amortized cost, which is
net of deferred items, including premiums, discounts and hedging-related basis adjustments. This item includes both non-
callable and callable debt, as well as short-term zero-coupon discount notes. The fair value of the short-term zero-coupon
discount notes is based on a discounted cash flow model with market inputs. The valuation of other debt securities represents
the proceeds that we would receive from the issuance of debt and is generally based on market prices obtained from broker/
dealers, reliable third-party pricing service providers or direct market observations. We elected the fair value option for debt
securities denominated in foreign currencies and reported them at fair value on our GAAP consolidated balance sheets
effective January 1, 2008.
Guarantee Obligation
We did not establish a guarantee obligation for GAAP purposes for PCs and Structured Securities that were issued
through our guarantor swap program prior to adoption of FIN 45. In addition, after it is initially recorded at fair value the
guarantee obligation is not subsequently carried at fair value for GAAP purposes. On our consolidated fair value balance
sheets, the guarantee obligation reflects the fair value of our guarantee obligation on all PCs regardless of when they were
issued. Additionally, for fair value balance sheet purposes, our guarantee obligation is valued using a model that is calibrated
to entry pricing information to estimate the fair value on our seasoned guarantee obligation. Entry pricing information used
in our model includes the spot delivery fee and management and guarantee fee used to determine the amount charged to
customers for executing our new securitizations. For information concerning our valuation approach and accounting policies
related to our guarantees of mortgage assets for GAAP purposes, see “NOTE 1: SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES” and “NOTE 2: FINANCIAL GUARANTEES AND MORTGAGE SECURITIZATIONS.”
Reserve for Guarantee Losses on PCs
The carrying amount of the reserve for guarantee losses on PCs on our GAAP consolidated balance sheets represents
the contingent losses contained in the loans that back our PCs. This line item has no basis on our consolidated fair value
balance sheets, because the estimated fair value of all expected default losses (both contingent and non-contingent) is
included in the guarantee obligation reported on our consolidated fair value balance sheets.
Other Liabilities
Other liabilities principally consist of funding liabilities associated with investments in LIHTC partnerships, accrued
interest payable on debt securities and other miscellaneous obligations of less than one year. We believe the carrying amount
of these liabilities is a reasonable approximation of their fair value, except for funding liabilities associated with investments
in LIHTC partnerships, for which fair value is estimated using expected cash flows discounted at a market-based yield.
Furthermore, certain deferred items reported as other liabilities on our GAAP consolidated balance sheets are assigned zero
value on our consolidated fair value balance sheets, such as deferred credit fees. Also, as discussed in “Other Assets,” other
liabilities may include a deferred tax liability adjusted for fair value balance sheet purposes.
Minority Interests in Consolidated Subsidiaries
Minority interests in consolidated subsidiaries primarily represent preferred stock interests that third parties hold in our
two majority-owned real estate investment trust, or REIT subsidiaries. In accordance with GAAP, we consolidated the REITs.
The preferred stock interests are not within the scope of SFAS 107 disclosure requirements. However, we present the fair
value of these interests on our consolidated fair value balance sheets. The fair value of the third-party minority interests in
these REITs was based on the estimated value of the underlying REIT preferred stock we determined based on a valuation
model. On September 19, 2008, FHFA, as Conservator, advised us of FHFA’s determination that no further common or
preferred stock dividends should be paid by our REIT subsidiaries.
Net Assets Attributable to Senior Preferred Stockholders
Our senior preferred stock held by Treasury in connection with the Purchase Agreement is recorded at the stated
liquidation preference for purposes of the consolidated fair value balance sheets. As the senior preferred stock is restricted as
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