Ford 2010 Annual Report Download - page 86

Notes to the Financial Statements
84 Ford Motor Company | 2010 Annual Report
NOTE 1. PRESENTATION (Continued)
Certain Transactions Between Automotive and Financial Services Sectors
Intersector transactions occur in the ordinary course of business. We formally documented certain long-standing
business practices with Ford Credit, our indirect wholly-owned subsidiary, in a 2001 agreement that was amended in
2006. Additional detail regarding certain transactions and the effect on each sector's balance sheet at December 31 is
shown below (in billions):
2010
20102010
2010
2009
20092009
2009
Automotive
AutomotiveAutomotive
Automotive
Financial
Financial Financial
Financial
Services
ServicesServices
Services
Automotive
AutomotiveAutomotive
Automotive
Financial
Financial Financial
Financial
Services
ServicesServices
Services
Finance receivables, net (a)................................................................
................................
$ 3.4 $ 3.9
Unearned interest supplements and residual support (b)
................................
(2.7) (3.0)
Wholesale receivables/Other (c)................................................................ 0.5 0.6
Net investment in operating leases (d)................................
................................
0.6 0.5
Other assets (e)................................................................
................................
0.3 0.5
Intersector receivables/(payables) (f)................................
................................
$ 1.9 (1.9) $ 2.6 (2.6)
__________
(a)
Automotive sector receivables (generated primarily from vehicle and part
s sales to third parties) sold to Ford Credit. These receivables are
classified as
Other receivables,
net
on our consolidated balance sheet and
Finance receivables, net
on our sector balance sheet.
(b)
As of January
1,
2008, to reduce ongoing obligations
to Ford Credit and to be consistent with general industry practice, we began paying
interest supplements and residual value support to Ford Credit at the time Ford Credit
originated
eligible contracts
with retail customers
.
(c) Primarily wholesale receivables with entities that are consolidated subsidiaries of Ford. The consolidated subsidiaries include dealerships that
are partially or wholly owned by Ford and consolidated as VIEs, and also certain overseas affiliates.
(d) Sale-leaseback agreement between Automotive and Financial Services sectors relating to vehicles that we lease to our employees.
(e) Primarily used vehicles purchased by Ford Credit pursuant to the Automotive sector's obligation to repurchase such vehicles from daily rental
car companies. These vehicles are subsequently sold at auction.
(f) Amounts owed to the Automotive sector by Financial Services sector, or vice versa, largely related to our tax sharing agreement.
Additionally, amounts recorded as revenue by the Financial Services sector for retail and lease supplements for
special financing and leasing programs were $3.2 billion, $3.7 billion, and $4.8 billion in 2010, 2009, and 2008,
respectively. The Automotive sector had accrued in Accrued liabilities and deferred revenue $269 million and $1 billion
for interest supplements at December 31, 2010 and 2009, respectively, and about $26 million and about $180 million for
residual-value supplements at December 31, 2010 and 2009, respectively. These amounts will be paid to Ford Credit
over the term of the related finance contracts.
NOTE 2. SUMMARY OF ACCOUNTING POLICIES
For each accounting topic that is addressed in its own footnote, the description of the accompanying accounting policy
may be found in the related footnote. The remaining accounting policies are described below.
Use of Estimates
The preparation of financial statements in accordance with U.S. 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 to
account 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.
Foreign Currency Translation
The assets and liabilities of foreign subsidiaries using the local currency as their functional currency are translated to
U.S. dollars using end-of-period exchange rates and any resulting translation adjustments are reported in Accumulated
other comprehensive income/(loss). Upon sale or liquidation of an investment in a foreign subsidiary, the accumulated
amount of translation adjustments related to that entity is reclassified to net income as part of the recognized gain or loss
on the investment.