Ford 2011 Annual Report Download - page 100

Notes to the Financial Statements
98 Ford Motor Company | 2011 Annual Report
NOTE 2. SUMMARY OF ACCOUNTING POLICIES (Continued)
Labor Costs
On October 26, 2011, we signed a new national labor agreement with the UAW covering approximately 41,000
employees in the United States ("Agreement"). Among other things, the Agreement sets wages and benefits for the
covered employees for a four-year period expiring in September 2015.
The Agreement provided for a ratification bonus of $6,000 to most of the covered employees. These bonuses were
paid, and the full amount of the expense recorded, in the fourth quarter of 2011.
Covered employees also will receive four annual operational performance bonuses of up to $250 per year beginning
in December 2011, and four annual inflation protection lump sum payments in the amount of $1,500 per year beginning in
June 2012. The first operational performance bonus in the amount of $250 was paid and expensed in the fourth quarter
of 2011. The subsequent operational performance bonuses will be expensed over the twelve-month period leading up to
each payment date. The first inflation protection lump sum payment will be expensed over the eight-month period leading
up to the June 2012 payment date; each subsequent lump sum payment will be expensed over the twelve-month period
leading up to the respective June payment date.
The Agreement also modifies the method for calculating payment to covered employees under our profit sharing plan.
Planned profit sharing payments are accrued throughout the year in which the payment is earned. Each quarter, we
evaluate and adjust as necessary the year to date accrual to ensure that it is consistent with our expected full year profit
and current profit sharing plan in place at the end of the quarter. We generally make any payment under the profit sharing
plan in the first quarter subsequent to the year in which it is earned. We made a partial payment in the fourth quarter of
2011, based on first half 2011 Ford North America profits, with the remainder of the 2011 profit sharing payment to be
made in the first quarter of 2012.
Payments made pursuant to the Agreement are recognized in Automotive cost of sales.
Selected Other Costs
Freight, engineering, and research and development costs are included in Automotive cost of sales; advertising costs
are included in Selling, administrative and other expenses. Freight costs on goods shipped are expensed at the earlier of
revenue recognition or as incurred. Advertising costs are expensed as incurred. Engineering, research and development
costs are expensed as incurred when performed internally or when performed by a supplier if we guarantee
reimbursement. Engineering, research, and development, and advertising expenses for the years ended December 31
were as follows (in billions):
Engineering, research, and development
Advertising
2011
$5.3
4.1
2010
$5.0
3.9
2009
$4.7
3.2
Presentation of Sales and Sales-Related Taxes
We collect and remit taxes assessed by different governmental authorities that are both imposed on and concurrent
with a revenue-producing transaction between us and our customers. These taxes may include, but are not limited to,
sales, use, value-added, and some excise taxes. We report the collection of these taxes on a net basis (excluded from
revenues).