Freddie Mac 2012 Annual Report Download - page 228

shares outstanding are not included in the calculation because it would have an antidilutive effect. See “NOTE 11:
STOCKHOLDER’S EQUITY (DEFICIT) — Stock-Based Compensation” for additional information on our earnings-per-
share calculation.
Comprehensive Income
Comprehensive income is the change in equity, on a net of tax basis, resulting from transactions and other events and
circumstances from non-owner sources during a period. It includes all changes in equity during a period, except those
resulting from investments by stockholders. We define comprehensive income as consisting of net income (loss) plus
changes in: (a) the unrealized gains and losses on available-for-sale securities; (b) the effective portion of derivatives
accounted for as cash flow hedge relationships; and (c) defined benefit plans.
Recently Adopted Accounting Guidance
Fair Value Measurement
On January 1, 2012, we adopted an amendment to the accounting guidance pertaining to fair value measurement and
disclosure. This amendment provided: (a) clarification about the application of existing fair value measurement and
disclosure requirements; and (b) changes to the guidance for measuring fair value and disclosing information about fair value
measurements. The adoption of this amendment did not have a material impact on our consolidated financial statements.
Reconsideration of Effective Control for Repurchase Agreements
On January 1, 2012, we adopted an amendment to the accounting guidance for transfers and servicing with regard to
repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial
assets before their maturity. This amendment removed the criterion related to collateral maintenance from the transferor’s
assessment of effective control. It focuses the assessment of effective control on the transferor’s rights and obligations with
respect to the transferred financial assets and not whether the transferor has the practical ability to perform in accordance
with those rights or obligations. The adoption of this amendment did not have a material impact on our consolidated financial
statements.
A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring
On July 1, 2011, we adopted an amendment to the accounting guidance related to the classification of loans as TDRs,
which clarifies when a restructuring such as a loan modification is considered a TDR. This amendment clarifies the guidance
regarding a creditor’s evaluation of whether a debtor is experiencing financial difficulty and whether a creditor has granted a
concession to a debtor for purposes of determining if a restructuring constitutes a TDR.
Both single-family and multifamily loans that experience restructurings resulting in a concession being granted to a
borrower experiencing financial difficulties are considered TDRs. The amendment provides guidance to determine whether a
borrower is experiencing financial difficulties, which is largely consistent with the guidance for debtors. As we had
previously analogized to the guidance for debtors, this change does not have a significant impact on our determination of
whether a borrower is experiencing financial difficulties. Pursuant to this amendment, a concession is deemed to have been
granted when, as a result of the restructuring, we do not expect to collect all amounts due, including interest accrued, at the
original contractual interest rate. The amendment also specifies that a concession shall not be determined by comparing the
borrower’s pre-restructuring effective interest rate to the post-restructuring effective interest rate. These changes result in a
significant impact on our determination of whether a concession has been granted.
The amendment was effective for interim and annual periods beginning on or after June 15, 2011 and applied as of
July 1, 2011 to restructurings occurring on or after January 1, 2011. As of September 30, 2011, the total recorded investment
in loans identified as TDRs during the third quarter of 2011 which relate to modifications or agreements entered into between
January 1, 2011 and June 30, 2011 was $7.5 billion, and the allowance for credit losses related to those loans was
$1.7 billion. We recognized additional provision for credit losses of $0.2 billion during the third quarter of 2011 due to the
population of restructurings occurring in the first half of 2011 that are now considered TDRs.
Please refer to “NOTE 5: INDIVIDUALLY IMPAIRED AND NON-PERFORMING LOANS” for further disclosures
regarding our loan restructurings accounted for and disclosed as TDRs and for discussion regarding how modifications and
other loss mitigation activities are factored into our allowance for loan losses.
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