Sallie Mae 2008 Annual Report Download - page 140

2. Significant Accounting Policies (Continued)
such real estate at the lower of cost or fair value. Primarily due to the weakening of the U.S. economy and
declines in real estate values, the Company recorded $368 million of impairment in 2008 related to the
purchased paper portfolios. There is approximately $1.2 billion on the balance sheet as of December 31, 2008
related to those assets.
Restructuring Activities
The Company is restructuring its business in response to the impact of the College Cost Reduction and
Access Act of 2007 (“CCRAA”) and challenges in the capital markets. One-time, involuntary benefit
arrangements, disposal costs (including contract termination costs and other exit costs), as well as certain other
costs that are incremental and incurred as a direct result of the Company’s restructuring plans, are accounted
for in accordance with the FASB’s SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal
Activities,” and are classified as restructuring expenses in the accompanying consolidated statements of
income.
In conjunction with its restructuring plans, the Company has entered into one-time benefit arrangements
with employees, primarily senior executives, who have been involuntarily terminated. The Company recog-
nizes a liability when all of the following conditions have been met and the benefit arrangement has been
communicated to the employees:
• Management, having the authority to approve the action, commits to a plan of termination;
• The plan of termination identifies the number of employees to be terminated, their job classifications or
functions and their locations and the expected completion date;
• The plan of termination establishes the terms of the benefit arrangement, including the benefits that
employees will receive upon termination, in sufficient detail to enable employees to determine the type
and amount of benefits they will receive if they are involuntarily terminated; and
• Actions required to complete the plan of termination indicate that it is unlikely that significant changes
to the plan of termination will be made or that the plan of termination will be withdrawn.
Severance costs under such one-time termination benefit arrangements may include all or some combina-
tion of severance pay, medical and dental benefits, outplacement services, and certain other costs.
Contract termination costs are expensed at the earlier of (1) the contract termination date or (2) the cease
use date under the contract. Other exit costs are expensed as incurred and classified as restructuring expenses
if (1) the cost is incremental to and incurred as a direct result of planned restructuring activities, and (2) the
cost is not associated with or incurred to generate revenues subsequent to the Company’s consummation of the
related restructuring activities.
In addition to one-time involuntary benefit arrangements, the Company sponsors the SLM Corporation
Employee Severance Plan, which provides severance benefits in the event of termination of the Company’s
and its subsidiaries’ full-time employees (with the exception of certain specified levels of management and
employees of the Company’s APG subsidiaries) and part-time employees who work at least 24 hours per
week. The Company also sponsors the DMO Employee Severance Plan, which provides severance benefits to
certain specified levels of full-time management and full-time employees in the Company’s APG subsidiaries.
The Employee Severance Plan and the DMO Employee Severance Plan (collectively, the “Severance Plan”)
establishes specified benefits based on base salary, job level immediately preceding termination and years of
service upon termination of employment due to Involuntary Termination or a Job Abolishment, as defined in
the Severance Plan. The benefits payable under the Severance Plan relate to past service and they accumulate
F-20
SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts, unless otherwise stated)