Freddie Mac 2011 Annual Report Download - page 317

Impacts on Consolidated Statements of Income and Comprehensive Income
Prospective adoption of these changes in accounting principles also significantly impacted the presentation of our
consolidated statements of income and comprehensive income. These impacts are discussed below:
Line Items No Longer Separately Presented
Line items that are no longer separately presented on our consolidated statements of income and comprehensive
income include:
• Management and guarantee income — we no longer recognize management and guarantee income on PCs and
Other Guarantee Transactions issued by trusts that we have consolidated; rather, the portion of the interest collected
on the underlying loans that represents our management and guarantee fee is recognized as part of interest income
on mortgage loans. We continue to recognize management and guarantee income related to our other guarantee
commitments and guarantees issued to non-consolidated entities in other income;
• Gains (losses) on guarantee asset and income on guarantee obligation — we no longer recognize a guarantee asset
and a guarantee obligation for guarantees issued to trusts that we have consolidated; therefore, we also no longer
recognize gains (losses) on guarantee asset and income on guarantee obligation for such trusts. However, we
continue to recognize a guarantee asset and a guarantee obligation for our other guarantee commitments and
guarantees issued to non-consolidated entities and the corresponding gains (losses) on guarantee asset and income
on guarantee obligation, which are recorded in other income;
• Losses on loans purchased — we no longer recognize the acquisition of loans from PC trusts that we have
consolidated as a purchase with an associated loss, as these loans are already reflected on our consolidated balance
sheet. Instead, when we acquire a loan from these entities, we reclassify the loan from mortgage loans held-for-
investment by consolidated trusts to unsecuritized mortgage loans held-for-investment and record the cash tendered
as an extinguishment of the related PC debt within debt securities of consolidated trusts held by third parties. We
continue to recognize losses on loans purchased related to our other guarantee commitments and losses from
purchases of loans from non-consolidated entities in other expenses;
• Recoveries of loans impaired upon purchase — as these acquisitions of loans from PC trusts that we have
consolidated are no longer treated as purchases for accounting purposes, there will be no recoveries of such loans
related to consolidated VIEs that require recognition in our consolidated statements of income and comprehensive
income; and
• Trust management income — we no longer recognize trust management income from the single-family PC trusts
that we consolidate; rather, such amounts are now recognized in net interest income.
Line Items Significantly Impacted and Still Separately Presented
Line items that were significantly impacted and that continue to be separately presented on our consolidated
statements of income and comprehensive income include:
• Interest income on mortgage loans — we now recognize interest income on the mortgage loans underlying PCs and
Other Guarantee Transactions issued by trusts that we consolidate, which includes the portion of interest that was
historically recognized as management and guarantee income. Upfront credit-related and other fees received in
connection with such loans historically were treated as a component of the related guarantee obligation;
prospectively, these fees are treated as basis adjustments to the loans to be amortized over their respective lives as
a component of interest income on mortgage loans;
• Interest income on investments in securities — we no longer recognize interest income on our investments in the
PCs and Other Guarantee Transactions issued by trusts that we consolidate, as we now recognize interest income
on the mortgage loans underlying PCs and Other Guarantee Transactions issued by trusts that we consolidate;
• Interest expense — we now recognize interest expense on PCs and Other Guarantee Transactions that were issued
by trusts that we consolidate and are held by third parties; and
• Other gains (losses) on investments — we no longer recognize other gains (losses) on investments for single-family
PCs and certain Other Guarantee Transactions because those securities are no longer accounted for as investments
by us as a result of our consolidation of the related trusts.
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