Freddie Mac 2010 Annual Report Download - page 223

Net impairment of available-for-sale securities recognized in earnings includes other-than-temporary impairments of
non-mortgage-related asset-backed securities where we could not assert that we did not intend to sell these securities before a
recovery of the unrealized losses. The decision to impair these asset-backed securities is consistent with our consideration of
these securities as a contingent source of liquidity. See “NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES — Investments in Securities” for information regarding our policy on accretion of impairments.
Table 8.5 presents a roll-forward of the credit-related other-than-temporary impairment component of the amortized cost
related to available-for-sale securities: (a) that we have written down for other-than-temporary impairment; and (b) for which
the credit component of the loss is recognized in earnings. The credit-related other-than-temporary impairment component of
the amortized cost represents the difference between the present value of expected future cash flows, including the estimated
proceeds from bond insurance, and the amortized cost basis of the security prior to considering credit losses. The beginning
balance represents the other-than-temporary impairment credit loss component related to available-for-sale securities for
which other-than-temporary impairment occurred prior to January 1, 2010. Net impairment of available-for-sale securities
recognized in earnings is presented as additions in two components based upon whether the current period is: (a) the first
time the debt security was credit-impaired; or (b) not the first time the debt security was credit-impaired. The credit loss
component is reduced if we sell, intend to sell or believe we will be required to sell previously credit-impaired
available-for-sale securities. Additionally, the credit loss component is reduced if we receive cash flows in excess of what we
expected to receive over the remaining life of the credit-impaired debt security or the security matures or is fully written
down.
Table 8.5 — Other-Than-Temporary Impairments Related to Credit Losses on Available-For-Sale Securities
(1)
Year Ended
December 31, 2010
(in millions)
Credit-related other-than-temporary impairments on available-for-sale securities recognized in earnings:
Beginning balance — remaining credit losses to be realized on available-for-sale securities held at the beginning of the period
where other-than-temporary impairments were recognized in earnings ...................................... $11,513
Additions:
Amounts related to credit losses for which an other-than-temporary impairment was not previously recognized . . . ....... 120
Amounts related to credit losses for which an other-than-temporary impairment was previously recognized ............. 4,188
Reductions:
Amounts related to securities which were sold, written off or matured ...................................... (650)
Amounts related to amortization resulting from increases in cash flows expected to be collected that are recognized over the
remaining life of the security . . . . . . .......................................................... (293)
Ending balance — remaining credit losses to be realized on available-for-sale securities held at period end where other-than-
temporary impairments were recognized in earnings
(2)
................................................. $14,878
(1) Excludes other-than-temporary impairments on securities that we intend to sell or it is more likely than not that we will be required to sell before
recovery of the unrealized losses.
(2) Excludes increases in cash flows expected to be collected that will be recognized in earnings over the remaining life of the security of $558 million, net
of amortization.
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