Citigroup Inc.

FUTURE APPLICATION OF ACCOUNTING STANDARDSLoss-Contingency DisclosuresIn July 2010, the FASB issued a second exposure draft proposing expandeddisclosures regarding loss contingencies. This proposal increases thenumber of loss contingencies subject to disclosure and requires substantialquantitative and qualitative information to be provided about thoseloss contingencies. The proposal will have no impact on the Company’saccounting for loss contingencies.Credit Quality and Allowance for Credit LossesDisclosuresIn July 2010, the FASB issued ASU No. 2010-20, Disclosures about CreditQuality of Financing Receivables and Allowance for Credit Losses.The ASU requires a greater level of disaggregated information about theallowance for credit losses and the credit quality of financing receivables. Theperiod-end balance disclosure requirements for loans and the allowance forloans losses are effective for reporting periods ending on or after December15, 2010 and are included in this annual report (see Notes 16 and 17), whiledisclosures for activity during a reporting period in the loan and allowancefor loan losses accounts will be effective for reporting periods beginningon or after December 15, 2010. The FASB has deferred the troubled debtrestructuring (TDR) disclosure requirements that were part of this ASU. Thedisclosures on TDRs were supposed to be required for the first quarter of 2011.However, FASB has postponed the effective date to be concurrent with theeffective date of the proposed guidance for identifying a TDR, expected to bein the second quarter of 2011.Potential Amendments to Current Accounting StandardsIn January 2011, the FASB issued the Proposed Accounting StandardsUpdate—Balance Sheet (Topic 210): Offsetting, to propose a frameworkfor offsetting financial assets and liabilities. This proposal would prohibitnetting most derivative contracts covered by ISDA master netting agreementsand also prohibit netting most repurchase/resale agreements under standardindustry agreements that are allowed to be netted today and would result in asignificant gross-up of assets and liabilities on the balance sheet.The FASB and IASB are currently working on several joint projects,including amendments to existing accounting standards governing financialinstruments and lease accounting. Upon completion of the standards, theCompany will need to re-evaluate its accounting and disclosures. The FASBis proposing sweeping changes to the classification and measurement offinancial instruments, hedging and impairment guidance. The FASB is alsoworking on a project that would require all leases to be capitalized on thebalance sheet. These projects will have significant impacts for the Company.However, due to ongoing deliberations of the standard-setters, the Company iscurrently unable to determine the effect of future amendments or proposals.Investment Company Audit Guide (SOP 07-1)In July 2007, the AICPA issued Statement of Position 07-1, “Clarificationof the Scope of the Audit and Accounting Guide for Investment Companiesand Accounting by Parent Companies and Equity Method Investors forInvestments in Investment Companies” (SOP 07-1) (now incorporatedinto ASC 946-10, Financial Services-Investment Companies), which wasexpected to be effective for fiscal years beginning on or after December 15,2007. However, in February 2008, the FASB delayed the effective dateindefinitely by issuing an FSP SOP 07-1-1, “Effective Date of AICPAStatement of Position 07-1.” This statement sets forth more stringent criteriafor qualifying as an investment company than does the predecessor AuditGuide. In addition, ASC 946-10 (SOP 07-1) establishes new criteria for aparent company or equity method investor to retain investment companyaccounting in their consolidated financial statements. Investment companiesrecord all their investments at fair value with changes in value reflectedin earnings. The Company is currently evaluating the potential impact ofadopting the SOP.177