Freddie Mac 2015 Annual Report Download - page 260

Financial Statements Notes to the Consolidated Financial Statements | Note 7
Freddie Mac 2015 Form 10-K 258
NOTE 7: DEBT SECURITIES AND SUBORDINATED
BORROWINGS
The table below summarizes the interest expense per our consolidated statements of comprehensive
income and the balances of total debt, net per our consolidated balance sheets.
Interest Expense for the
Balance, Net Year Ended December 31,
(in millions) 2015 2014 2015 2014 2013
Debt securities of consolidated trusts held by
third parties $ 1,556,121 $ 1,479,473 $45,536 $48,003 $47,350
Other debt:
Short-term debt 113,572 134,619 173 145 178
Long-term debt 300,734 315,450 6,207 6,768 8,251
Total other debt 414,306 450,069 6,380 6,913 8,429
Total debt, net $ 1,970,427 $ 1,929,542 $51,916 $54,916 $55,779
Debt securities that we issue are classified as either debt securities of consolidated trusts held by third
parties or other debt. We issue other debt to fund our operations.
Both debt of our consolidated trusts and other debt, except for certain debt for which we elected the fair
value option, are reported at amortized cost. Deferred items, including premiums, discounts, and hedging-
related basis adjustments, are reported as a component of total debt, net. Issuance costs are reported as
a component of other assets. These items are amortized and reported through interest expense using the
effective interest method over the contractual life of the related indebtedness. Amortization of premiums,
discounts, and issuance costs begins at the time of debt issuance. Amortization of hedging-related basis
adjustments begins upon the discontinuation of the related hedge relationship.
We elected the fair value option on certain debt securities of consolidated trusts held by third parties and
certain other debt. The change in fair value for debt recorded at fair value is reported as other income in
our consolidated statements of comprehensive income. For debt where we have elected the fair value
option, upfront costs and fees are recognized in earnings as incurred and not deferred. For additional
information on our election of the fair value option, see Note 14.
When we repurchase or call outstanding debt securities, we recognize a gain or loss related to the
difference between the amount paid to redeem the debt security and the carrying value in earnings as a
component of gains (losses) on extinguishment of debt. Contemporaneous transfers of cash between us
and a creditor in connection with the issuance of a new debt security and satisfaction of an existing debt
security are accounted for as either an extinguishment or a modification of an existing debt security. If the
debt securities have substantially different terms, the transaction is accounted for as an extinguishment of
the existing debt security. The issuance of a new debt security is recorded at fair value, fees paid to the
creditor are expensed as incurred and fees paid to third parties are deferred and amortized into interest
expense over the life of the new debt security using the effective interest method. If the terms of the
existing debt security and the new debt security are not substantially different, the transaction is
accounted for as a modification of the existing debt. Fees paid to the creditor are deferred and amortized
into interest expense over the life of the modified debt security using the effective interest method and
fees paid to third parties are expensed as incurred.