Ford 2009 Annual Report Download - page 104

Notes to the Financial Statements
102 Ford Motor Company | 2009 Annual Report
NOTE 8. NET INVESTMENT IN OPERATING LEASES (Continued)
Included in Financial Services revenues are rents on operating leases. The amounts contractually due for minimum
rentals on operating leases are as follows (in millions):
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Operating lease depreciation expense (which includes gains and losses on disposal of assets) was as follows
(in millions):
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NOTE 9. ALLOWANCE FOR CREDIT LOSSES — FINANCIAL SERVICES SECTOR
The allowance for credit losses is our estimate of the probable credit losses inherent in finance receivables and
operating leases at the date of the balance sheet. Consistent with our normal practices and policies, we assess the
adequacy of our allowance for credit losses quarterly and regularly evaluate the assumptions and models used in
establishing the allowance. Because credit losses can vary substantially over time, estimating credit losses requires a
number of assumptions about matters that are uncertain.
The allowance for credit losses is estimated using a combination of models and management judgment and is based
on factors such as historical trends in credit losses and recoveries (including key metrics such as delinquencies,
repossessions, and bankruptcies), the composition of our present portfolio (including vehicle brand, term, risk evaluation,
and new/used vehicles), trends in historical and projected used vehicle values and economic conditions. Additions to the
allowance for credit losses are made by recording charges to Financial Services provision for credit and insurance losses
on our consolidated statement of operations. Finance receivables, investments in direct financing leases, and
investments in operating leases are charged to the allowance for credit losses at the earlier of when an account is
deemed to be uncollectible or when an account is 120 days delinquent, 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 investments in leases previously charged off as uncollectible are credited to the allowance for credit
losses.
Changes in Allowance for Credit Losses
Changes in the allowance for credit losses for finance receivables, investment in direct financing leases, and
investment in operating leases were as follows (in millions):
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The decrease in allowance for credit losses primarily reflected the decline in receivables and the related charge-offs.
At December 31, 2009, Ford Credit's allowance for credit losses included about $215 million that was based on
management's judgment regarding higher retail installment and lease repossession assumptions and higher wholesale
and dealer loan default assumptions compared with historical trends used in Ford Credit's models. At
December 31, 2008, Ford Credit's allowance for credit losses included about $210 million that was based on
management's judgment regarding higher severity assumptions. At December 31, 2007, Ford Credit's allowance for
credit losses did not include any adjustments for management judgment.