Ford 2009 Annual Report Download - page 94
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Notes to the Financial Statements
92 Ford Motor Company | 2009 Annual Report
NOTE 4. FAIR VALUE MEASUREMENTS (Continued)
We include an adjustment for non-performance risk in the recognized measure of fair value of derivative instruments.
The adjustment reflects the full credit default swap ("CDS") spread applied to a net exposure, by counterparty. We use
our counterparty's CDS spread when we are in a net asset position and our own CDS spread when we are in a net liability
position.
In certain cases, market data are not available and we use management judgment to develop assumptions which are
used to determine fair value. This includes situations where there is illiquidity for a particular currency or commodity, or
for longer-dated instruments. For longer-dated instruments where observable interest rates or foreign exchange rates are
not available for all periods through maturity, we hold the last available data point constant through maturity. For certain
commodity contracts, observable market data may be limited and, in those cases, we generally survey brokers and use
the average of the surveyed prices in estimating fair value. For securitization interest rate swaps, we use management
judgment in estimating timing of cash flows which may vary based on actual repayments of securitized contracts.
Retained Interest in Securitized Assets. Ford Credit estimates the fair value of retained interests using internal
valuation models, market inputs, and its own assumptions in estimating cash flows from the sales of retail receivables.
Pension Assets. Pension assets are recorded at fair value, and include fixed income and equity securities, as well as
alternative investments. Fixed income and equity securities may each be combined into commingled fund investments.
Commingled funds are valued to reflect the Company's interest in the fund based on the reported year-end net asset
value. Alternative investments include investments in private equity and hedge funds, and are valued based on year-end
reported net asset value, with adjustments as appropriate for lagged reporting of 1 – 3 months. For pension assets, the
balance sheet includes the funded status of the benefit plans, which represents the difference between the benefit
obligations and fair value of plan assets. Refer to Note 18 for additional information, including the input hierarchy and
Level 3 reconciliation.
Valuation methodologies for debt and finance receivables, for which fair value is measured for disclosure only, can be
found in Note 19 and 7, respectively.