Key Controls over Fair Value Measurement Citi’s processes include a number of key controls that are designed to ensure that fair value is measured appropriately, particularly where a fair-value model is internally developed and used to price a significant product.
Such controls include a model validation policy requiring that valuation models be validated by qualified personnel, independent from those who created the models and escalation procedures, to ensure that valuations using unverifiable inputs are identified and monitored on a regular basis by senior management.
CVA Methodology ASC 820-10 requires that Citi’s own credit risk be considered in determining the market value of any Citi liability carried at fair value.
These liabilities include derivative instruments as well as debt and other liabilities for which the fair value option was elected.
The credit valuation adjustment (CVA) is recognized on the balance sheet as a reduction in the associated liability to arrive at the fair value (carrying value) of the liability.
Prior to the fourth quarter of 2008, Citi had historically used its credit spreads observed in the credit default swap (CDS) market to estimate the market value of these liabilities.
Beginning in September 2008, Citi’s CDS spread and credit spreads observed in the bond market (cash spreads) diverged from each other and from their historical relationship.
For example, the three-year CDS spread narrowed from 315 basis points (bps) on September 30, 2008, to 202 bps on December 31, 2008, while the three-year cash spread widened from 430 bps to 490 bps over the same time period.
Due to the persistence and significance of this divergence during the fourth quarter of 2008, management determined that such a pattern may not be temporary and that using cash spreads would be more relevant to the valuation of debt instruments (whether issued as liabilities or purchased as assets).
Therefore, Citi changed its method of estimating the market value of liabilities for which the fair value option was elected to incorporate Citi’s cash spreads.
(CDS spreads continue to be used to calculate the CVA for derivative positions. )
This change in estimation methodology resulted in a $2.5 billion pretax gain recognized in earnings in the fourth quarter of 2008.
Citigroup recognized a pretax gain of $4,558 million due to changes in the CVA balance in 2008.
The table below summarizes the CVA for fair value option debt instruments, determined under each methodology as of December 31, 2008 and 2007, and the pretax gain that would have been recognized in 2008 had each methodology been used consistently during 2008 and 2007.
## Table 0 ##
(1) In changing the methodology for calculating the CVA reserve, Citi recorded the 2008 cumulative difference of $2.493 billion in December 2008, resulting in a year-to-date pretax gain of $4.558 billion recorded in the Consolidated Statement of Income.
The CVA recognized on fair value option debt instruments was $1,220 million and $5,446 million as of December 31, 2009 and 2008, respectively.
Citigroup recognized a pretax loss of $4,226 million in 2009 due to changes in the CVA balance.
The pretax loss in 2009 includes a pretax adjustment of $330 million reflecting a correction of errors in the calculation of CVA for periods through December 31, 2008.
For a further discussion, see Notes 1 and 34 to the Consolidated Financial Statements.
Revisions to the Earnings-per-Share Calculation In June 2008, the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities” (now incorporated into ASC 260-10-45-59A, Earnings Per Share: Participating Securities and the Two-Class Method).
Under the FSP, unvested share-based payment awards that contain nonforfeitable rights to dividends are considered to be a separate class of common stock and included in the EPS calculation using the “two-class method.
” Citigroup’s restricted and deferred share awards meet the definition of a participating security.
In accordance with the FSP, restricted and deferred shares are now included as a separate class of common stock in the basic and diluted EPS calculation.
The following table shows the effect of adopting the FSP on Citigroup’s basic and diluted EPS:
## Table 1 ##
Fair Value Disclosures About Pension Plan Assets In December 2008, the FASB issued FSP FAS 132(R)-1, Employers’ Disclosures about Pensions and Other Postretirement Benefit Plan Assets (now incorporated into ASC 715-20-50, Compensation and Benefits— Disclosure).
This FSP requires that more detailed information about plan assets be disclosed on an annual basis.
Citigroup is required to separate plan assets into the three fair value hierarchy levels and provide a roll-forward of the changes in fair value of plan assets classified as Level 3.
The disclosures about plan assets required by this FSP are effective for fiscal years ending after December15, 2009, but have no effect on the Consolidated Balance Sheet or Statement of Income.
Additional Disclosures for Derivative Instruments In March 2008, the FASB issued SFAS No.161, Disclosures about Derivative Instruments and Hedging Activities, an Amendment to SFAS 133 (now incorporated into ASC 815-10-50, Derivatives and Hedging— Disclosure).
The Standard requires enhanced disclosures about derivative instruments and hedged items that are accounted for under ASC 815 related interpretations.
The Standard is effective for all of the Company’s interim and annual financial statements beginning with the first quarter of 2009.
The Standard expands the disclosure requirements for derivatives and hedged items and has no impact on how Citigroup accounts for these instruments.
Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock Derivative contracts on a company’s own stock may be accounted for as equity instruments, rather than as assets and liabilities, only if they are both indexed solely to the company’s stock and settleable in shares.
In June 2008, the FASB ratified the consensus reached by the EITF on Issue 07-5, “Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock” (Issue 07-5) (now ASC 815-40- 15-5, Derivatives and Hedging: Evaluating Whether an Instrument is Considered Indexed to an Entity’s Own Stock).
An instrument (or embedded feature) would not be considered indexed to an entity’s own stock if its settlement amount is affected by variables other than those used to determine the fair value of a “plain vanilla” option or forward contract on equity shares, or if the instrument contains a feature (such as a leverage factor) that increases exposure to those variables.
An equity-linked financial instrument (or embedded feature) would not be considered indexed to the entity’s own stock if the strike price is denominated in a currency other than the issuer’s functional currency.
This issue is effective for Citigroup on January1, 2009 and did not have a material impact.
Equity Method Investment Accounting Considerations In November 2008, the FASB ratified the consensus reached by the EITF on Issue 08-6, “Equity Method Investment Accounting Considerations” (Issue 08-6) (now ASC 323-10, Investments—Equity Method and Joint Ventures).
An entity shall measure its equity method investment initially at cost.
Any other-than-temporary impairment of an equity method investment should be recognized in accordance with Opinion 18.
An equity method investor shall not separately test an investee’s underlying assets for impairment.
Share issuance by an investee shall be accounted for as if the equity method investor had sold a proportionate share of its investment, with gain or loss recognized in earnings.
This issue is effective for Citigroup on January1, 2009, and did not have a material impact.
·	 The decrease in Mortgage Servicing Rights of $2.7 billion was primarily attributed to mark-to-market losses recognized in the portfolio due to decreases in the mortgage interest rates and increases in refinancing.
·	 The increase in Securities sold under agreements to repurchase of $5 billion is driven by a $6.2 billion increase from net transfers in as the continued credit crisis impacted the availability of observable inputs for the underlying securities related to this liability.
This was offset by a reduction from net settlements of $1.4 billion.
·	 The decrease in short-term borrowings of $3.7 billion is due to net transfers out of $1.8 billion as valuation methodology inputs considered to be unobservable were determined not to be significant to the overall valuation.
In addition, net payments of $1.8 billion were made during the year.
·	 The increase in long-term debt of $2.2 billion is driven by: – The net transfers in of $38.8 billion, substantially all of which related to the transfer of consolidated SIV debt in the first quarter of 2008, as the availability of observable inputs continued to decline due to the current crisis; offset by – $2.2 billion in gains recognized as credit spreads widened during the year; and – $34.3 billion decrease from net settlements/payments.
Included in these settlements were $21 billion of payments made on maturing SIV debt and the replacement of $17 billion of non-recourse, consolidated SIV debt classified as Level 3 with Citigroup debt classified as Level 2.
This replacement occurred in connection with the purchase of the SIV assets by the Company in November 2008.
Items Measured at Fair Value on a Nonrecurring Basis Certain assets and liabilities are measured at fair value on a nonrecurring basis and therefore are not included in the tables above.
These include assets measured at cost that have been written down to fair value during the periods as a result of an impairment.
In addition, these assets include loans held-for-sale that are measured at LOCOM that were recognized at fair value below cost at the end of the period.
The fair value of loans measured on a LOCOM basis is determined where possible using quoted secondary-market prices.
Such loans are generally classified as Level 2 of the fair-value hierarchy given the level of activity in the market and the frequency of available quotes.
If no such quoted price exists, the fair value of a loan is determined using quoted prices for a similar asset or assets, adjusted for the specific attributes of that loan.
The following table presents all loans held-for-sale that are carried at LOCOM as of December 31, 2009 and 2008 (in billions):
## Table 2 ##
Non-Accrual Assets The table below summarizes Citigroup’s view of non-accrual loans as of the periods indicated.
Non-accrual loans are loans in which the borrower has fallen behind in interest payments or, for corporate loans, where Citi has determined that the payment of interest or principal is doubtful, and which are therefore considered impaired.
Consistent with industry conventions, Citi generally accrues interest on credit card loans until such loans are charged-off, which typically occurs at 180 days contractual delinquency.
As such, the non-accrual loan disclosures in this section do not include credit card loans.
As discussed under “Accounting Policies” in Note 1 to the Consolidated Financial Statements, in situations where Citi reasonably expects that only a portion of the principal and interest owed will ultimately be collected, all payments received are reflected as a reduction of principal and not as interest income.
There is no industry-wide definition of non-accrual assets, however, and as such, analysis against the industry is not always comparable.
As discussed under “Loan and Credit Overview,” Citigroup has been actively moving corporate loans into the non-accrual category at earlier stages of anticipated distress.
Corporate non-accrual loans may still be current on interest payments, however, and as of December 31, 2009, over two-thirds of the total portfolio of non-accrual corporate loans are current and continue to make their contractual payments.
## Table 3 ##
(1) Excludes purchased distressed loans as they are generally accreting interest.
The carrying value of these loans was $920 million at December 31, 2009, $1.510 billion at December 31, 2008, $2.373 billion at December 31, 2007, $949 million at December 31, 2006, and $1.120 billion at December 31, 2005.

<table><tr><td>In millions of dollars</td><td>2008</td><td>2007</td></tr><tr><td>Year-end CVA reserve balance as calculated using</td><td></td><td></td></tr><tr><td>CDS spreads</td><td>$2,953</td><td>$888</td></tr><tr><td>Cash spreads</td><td>5,446</td><td>1,359</td></tr><tr><td>Difference-1</td><td>$2,493</td><td>$471</td></tr><tr><td>Year-to-date pretax gain from the change in CVA</td><td></td><td></td></tr><tr><td>reserve that would have been recorded in the</td><td></td><td></td></tr><tr><td>income statement as calculated using</td><td></td><td></td></tr><tr><td>CDS spreads</td><td>$2,065</td><td>$888</td></tr><tr><td>Cash spreads</td><td>4,087</td><td>1,359</td></tr></table>
<table><tr><td></td><td>2009</td><td>2008</td><td>2007</td></tr><tr><td>Basic earnings per share</td><td></td><td></td><td></td></tr><tr><td>As reported</td><td>N/A</td><td>$-5.59</td><td>$0.73</td></tr><tr><td>Two-class method</td><td>$-0.80</td><td>$-5.63</td><td>$0.68</td></tr><tr><td>Diluted earnings per share-1</td><td></td><td></td><td></td></tr><tr><td>As reported</td><td>N/A</td><td>$-5.59</td><td>$0.72</td></tr><tr><td>Two-class method</td><td>-0.80</td><td>$-5.63</td><td>$0.67</td></tr></table>
<table><tr><td></td><td>Aggregate cost</td><td>Fair value</td><td>Level 2</td><td>Level 3</td></tr><tr><td>December 31, 2009</td><td>$2.5</td><td>$1.6</td><td>$0.3</td><td>$1.3</td></tr><tr><td>December 31, 2008</td><td>3.1</td><td>2.1</td><td>0.8</td><td>1.3</td></tr></table>
<table><tr><td>In millions of dollars</td><td>2009</td><td>2008</td><td>2007</td><td>2006</td><td>2005</td></tr><tr><td>Citicorp</td><td>$4,968</td><td>$3,193</td><td>$2,027</td><td>$1,141</td><td>$1,136</td></tr><tr><td>Citi Holdings</td><td>27,216</td><td>19,104</td><td>6,941</td><td>3,906</td><td>3,888</td></tr><tr><td>Total non-accrual loans (NAL)</td><td>$32,184</td><td>$22,297</td><td>$8,968</td><td>$5,047</td><td>$5,024</td></tr><tr><td>Corporate non-accrual loans-1</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>North America</td><td>$5,621</td><td>$2,660</td><td>$291</td><td>$68</td><td>$91</td></tr><tr><td>EMEA</td><td>6,308</td><td>6,330</td><td>1,152</td><td>128</td><td>297</td></tr><tr><td>Latin America</td><td>569</td><td>229</td><td>119</td><td>152</td><td>246</td></tr><tr><td>Asia</td><td>1,047</td><td>513</td><td>103</td><td>88</td><td>272</td></tr><tr><td></td><td>$13,545</td><td>$9,732</td><td>$1,665</td><td>$436</td><td>$906</td></tr><tr><td>Citicorp</td><td>$2,925</td><td>$1,364</td><td>$247</td><td>$133</td><td>$319</td></tr><tr><td>Citi Holdings</td><td>10,620</td><td>8,368</td><td>1,418</td><td>303</td><td>587</td></tr><tr><td></td><td>$13,545</td><td>$9,732</td><td>$1,665</td><td>$436</td><td>$906</td></tr><tr><td>Consumer non-accrual loans-1</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>North America</td><td>$15,555</td><td>$9,617</td><td>$4,841</td><td>$3,139</td><td>$2,860</td></tr><tr><td>EMEA</td><td>1,159</td><td>948</td><td>696</td><td>441</td><td>396</td></tr><tr><td>Latin America</td><td>1,340</td><td>1,290</td><td>1,133</td><td>643</td><td>523</td></tr><tr><td>Asia</td><td>585</td><td>710</td><td>633</td><td>388</td><td>339</td></tr><tr><td></td><td>$18,639</td><td>$12,565</td><td>$7,303</td><td>$4,611</td><td>$4,118</td></tr><tr><td>Citicorp</td><td>$2,043</td><td>$1,829</td><td>$1,780</td><td>$1,008</td><td>$817</td></tr><tr><td>Citi Holdings</td><td>16,596</td><td>10,736</td><td>5,523</td><td>3,603</td><td>3,301</td></tr><tr><td></td><td>$18,639</td><td>$12,565</td><td>$7,303</td><td>$4,611</td><td>$4,118</td></tr></table>

Question: If Total non-accrual loans (NAL) develops with the same growth rate in 2009, what will it reach in 2010? (in million)
Answer: 46455.12203