Ford 2002 Annual Report Download - page 78

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74
NOTES TO FINANCIAL STATEMENTS
NOTE 9. NET INVESTMENT IN OPERATING LEASES
The net investment in operating leases at December 31 was as follows (in millions):
2002 2001
Vehicles and other equipment, at cost $ 53,864 $ 58,076
Accumulated depreciation (13,247) (12,210)
Allowances for credit losses (562) (478)
Net investment in operating leases $ 40,055 $ 45,388
Minimum rentals on operating leases are contractually due as follows (in millions): 2003 — $7,453; 2004 — $4,323;
2005 — $3,854; 2006 — $1,231; 2007 — $198; thereafter — $1,568.
Assets subject to operating leases are depreciated primarily on the straight-line method over the term of the lease to reduce
the asset to its estimated residual value. Estimated residual values are based on assumptions for used vehicle prices at
lease termination and the number of vehicles that are expected to be returned. Depreciation expense (which includes gains
and losses on disposal of assets) was $10.0 billion in 2002, $10.0 billion in 2001, and $8.9 billion in 2000.
NOTE 10. ALLOWANCE FOR CREDIT LOSSES
The allowance for credit losses is our estimate of probable credit losses related to impaired receivables and operating
leases as of the date of the financial statements. This allowance is based on the credit quality of our present portfolio,
trends in historical and projected used vehicle values, general economic measures and our processes for servicing
receivables. Finance receivables and lease investments are charged to the allowance for credit losses when an account
is deemed to be uncollectible, taking into consideration the financial condition of the borrower or lessee, the value of the
collateral, recourse to guarantors and other factors. Recoveries on finance receivables and lease investments previously
charged off as uncollectible are credited to the allowance for credit losses.
Changes in the allowance for credit losses were as follows (in millions):
2002 2001 2000
Beginning balance $ 2,807 $ 1,684 $ 1,565
Provision for credit losses 3,000 3,397 1,701
Total charge-offs and recoveries:
Charge-offs (2,878) (2,524) (1,616)
Recoveries 486 375 300
Net losses (2,392) (2,149) (1,316)
Other changes, principally amounts related to finance
receivables sold and translation adjustment (186) (125) (266)
Ending balance $ 3,229 $ 2,807 $ 1,684
NOTE 11. LIABILITIES —AUTOMOTIVE SECTOR (IN MILLIONS)
2002 2001
Accrued Liabilities (Current)
Dealer and customer allowances and claims $ 14,166 $ 13,605
Deferred income taxes 2,614 297
Deferred revenue 2,423 2,460
Accrued interest 1,705 827
Employee benefit plans 1,360 1,790
Postretirement benefits other than pensions 1,301 1,230
Other 4,075 4,086
Total accrued liabilities $ 27,644 $ 24,295
Other Liabilities (Non-current)
Postretirement benefits other than pensions $ 16,344 $ 15,451
Unfunded pension obligation 12,818 1,143
Dealer and customer allowances and claims 9,125 6,805
Employee benefit plans 4,138 3,853
Other 4,461 3,621
Total other liabilities $ 46,886 $ 30,873