Freddie Mac 2012 Annual Report Download - page 102

Income Tax Benefit
For 2012, 2011, and 2010, we reported an income tax benefit of $1.5 billion, $0.4 billion, and $0.9 billion, respectively.
We have had ongoing discussions with the IRS regarding litigation related to various uncertain tax positions, and based on
the favorable resolution of the matters in dispute, the previously unrecognized tax benefits were reduced to zero in the fourth
quarter of 2012. See “NOTE 12: INCOME TAXES — Unrecognized Tax Benefits — IRS Examinations and Litigation” for
additional information.
Comprehensive Income (Loss)
Our comprehensive income (loss) was $16.0 billion, $(1.2) billion, and $0.3 billion for the years ended December 31,
2012, 2011, and 2010, respectively, consisting of: (a) $11.0 billion, $(5.3) billion, and $(14.0) billion of net income (loss),
respectively; and (b) $5.1 billion, $4.0 billion, and $14.3 billion of total other comprehensive income, respectively, primarily
related to a reduction in net unrealized losses related to our available-for-sale securities. See “CONSOLIDATED BALANCE
SHEETS ANALYSIS — Total Equity (Deficit)” for additional information regarding total other comprehensive income.
Segment Earnings
Our operations consist of three reportable segments, which are based on the type of business activities each performs —
Investments, Single-family Guarantee, and Multifamily. Certain activities that are not part of a reportable segment are
included in the All Other category.
The Investments segment reflects results from our investment, funding and hedging activities. In our Investments
segment, we invest principally in mortgage-related securities and single-family performing mortgage loans, which are funded
by other debt issuances and hedged using derivatives. In our Investments segment, we also provide funding and hedging
management services to the Single-family Guarantee and Multifamily segments. The Investments segment reflects changes
in the fair value of the Multifamily segment investment securities, primarily CMBS, and held-for-sale loans that are
associated with changes in interest rates. Segment Earnings for this segment consist primarily of the returns on these
investments, less the related funding, hedging, and administrative expenses.
The Single-family Guarantee segment reflects results from our single-family credit guarantee activities. In our Single-
family Guarantee segment, we purchase single-family mortgage loans originated by our seller/servicers in the primary
mortgage market. In most instances, we use the mortgage securitization process to package the purchased mortgage loans
into guaranteed mortgage-related securities. We guarantee the payment of principal and interest on the mortgage-related
securities in exchange for management and guarantee fees. Segment Earnings for this segment consist primarily of
management and guarantee fee revenues, including amortization of upfront fees, less credit-related expenses, administrative
expenses, allocated funding costs, and amounts related to net float benefits or expenses.
The Multifamily segment reflects results from our investment (both purchases and sales), securitization, and guarantee
activities in multifamily mortgage loans and securities. Our primary business model is to purchase held-for-sale multifamily
loans for aggregation and then securitization through multifamily K Certificates, which are considered Other Guarantee
Transactions. To a lesser extent, we provide guarantees of the payment of principal and interest on tax-exempt multifamily
pass-through certificates backed by multifamily housing revenue bonds. In addition, we guarantee the payment of principal
and interest on tax-exempt multifamily housing revenue bonds secured by low- and moderate-income multifamily mortgage
loans. Segment Earnings for this segment consist primarily of the interest earned on assets related to multifamily investment
activities and management and guarantee fee income, less credit-related expenses, administrative expenses, and allocated
funding costs. In addition, the Multifamily segment reflects gains on sale of mortgages and the impact of changes in fair
value of our investment securities and held-for-sale loans associated with market factors other than changes in interest rates,
such as liquidity and credit.
We evaluate segment performance and allocate resources based on a Segment Earnings approach, subject to the conduct
of our business under the direction of the Conservator. The financial performance of our Single-family Guarantee segment
and Multifamily segment are measured based on each segment’s contribution to GAAP net income (loss). Our Investments
segment is measured on its contribution to GAAP comprehensive income (loss), which consists of the sum of its contribution
to: (a) GAAP net income (loss); and (b) GAAP total other comprehensive income (loss), net of taxes. The sum of Segment
Earnings for each segment and the All Other category equals GAAP net income (loss). Likewise, the sum of comprehensive
income (loss) for each segment and the All Other category equals GAAP comprehensive income (loss).
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