Ford 2006 Annual Report Download - page 61

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59
Notes to the Financial Statements
59
NOTE 2. SUMMARY OF ACCOUNTING POLICIES (Continued)
Use of Estimates
The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that
affect our reported amounts of assets and liabilities, our disclosure of contingent assets and liabilities at the date of the
financial statements, and our revenue and expenses during the periods reported. Estimates are used when accounting
for certain items such as marketing accruals, warranty costs, employee benefit programs, etc. Estimates are based on
historical experience, where applicable, and assumptions that we believe are reasonable under the circumstances. Due
to the inherent uncertainty involved with estimates, actual results may differ.
NOTE 3. MARKETABLE, LOANED AND OTHER SECURITIES
We classify all securities as trading, available-for-sale or held-to-maturity. Trading securities are recorded at fair value,
with unrealized gains and losses included in income. Available-for-sale securities are recorded at fair value, with net
unrealized holding gains and losses reported, net of tax, in Accumulated other comprehensive income/(loss). Held-to-
maturity securities are recorded at amortized cost. Realized gains and losses for all securities are included in Automotive
interest income and other non-operating income/(expense), net and Financial Services revenues, and are accounted for
using the specific identification method.
The fair value of trading and available-for-sale securities is determined by quoted market prices. The estimated fair
value of securities for which there are no quoted market prices is based on similar types of securities traded in the market.
Expected maturities of debt securities may differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without penalty.
We loan certain securities from our portfolio to other institutions. Such securities are classified as Loaned securities.
Collateral for the loaned securities, consisting of cash or other securities, is maintained at a rate of 102% of the market
value of a loaned security. We received securities as collateral in the amount of $4.4 billion and $2.8 billion for 2006 and
2005, respectively. These securities have not been pledged or sold. We received cash as collateral in the amount of
$931 million and $764 million for 2006 and 2005, respectively. This cash collateral is recorded in Other assets on the
consolidated balance sheet and Other current assets on the sector balance sheet, offset by a current obligation to return
the collateral in Payables on the consolidated balance sheet and Other payables on the sector balance sheet. Income
received from loaning securities is recorded in Automotive interest income and other non-operating income/(expense),
net.