Ford 2002 Annual Report Download - page 92

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NOTES TO FINANCIAL STATEMENTS
NOTE 24. COMMITMENTS AND CONTINGENCIES (CONTINUED)
PRODUCT PERFORMANCE
Warranty: Estimated warranty costs and additional service actions are accrued for at the time the vehicle is sold to a dealer.
Included in the warranty cost accruals are costs for basic warranties on vehicles sold. Product recalls and other customer
service actions are not included in the warranty reconciliation below but are also accrued for at the time of sale. Estimates
for warranty costs are made based primarily on historical warranty claim experience. The following is a tabular reconciliation
of the product warranty accrual (in millions):
January 1, 2002 beginning balance $ 4,739
Payments made in 2002 (3,508)
Changes in accrual related to warranties issued in 2002 3,489
Changes in accrual related to pre-existing warranties 595
Foreign currency translation 86
December 31, 2002 ending balance $ 5,401
Extended Service Plan: Generally, extended service plans are separate contracts with retail customers who pay fees to
extend warranty coverage beyond the base warranty period. Under these plans, contract fees are recognized in income
over the contract period in proportion to the costs expected to be incurred in performing contracted services.
The following is a tabular reconciliation of extended service plan deferred revenue accounts (in millions):
January 1, 2002 beginning balance $ 2,659
Current year written revenue 1,206
Current year earned revenue (958)
Foreign currency translation 31
December 31, 2002 ending balance $ 2,938
LITIGATION AND CLAIMS
Various legal actions, governmental investigations and proceedings and claims are pending or may be instituted or asserted
in the future against us, including those arising out of alleged defects in our products; governmental regulations relating to
safety, emissions and fuel economy; financial services; employment-related matters; dealer, supplier and other contractual
relationships; intellectual property rights; product warranties; environmental matters; and shareholder matters. Certain of the
pending legal actions are, or purport to be, class actions. Some of the foregoing matters involve or may involve compensa-
tory, punitive, or antitrust or other treble damage claims in very large amounts, or demands for recall campaigns, environ-
mental remediation programs, sanctions, or other relief which, if granted, would require very large expenditures.
Litigation is subject to many uncertainties, and the outcome of individual litigated matters is not predictable with assurance.
We have established accruals for certain of the matters discussed in the foregoing paragraph where losses are deemed
probable. It is reasonably possible, however, that some of the matters discussed in the foregoing paragraph for which
accruals have not been established could be decided unfavorably to us and could require us to pay damages or make other
expenditures in amounts or a range of amounts that cannot be estimated at December 31, 2002. We do not reasonably
expect, based on our analysis, that such matters would have a material effect on future financial statements for a particular
year, although such an outcome is possible.
Ford Bantam half-ton pickup (South Africa)