Ford 2013 Annual Report Download - page 146

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144 Ford Motor Company | 2013 Annual Report
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 29. COMMITMENTS AND CONTINGENCIES (Continued)
For the majority of matters, which generally arise out of alleged defects in our products, we establish an accrual based
on our extensive historical experience with similar matters, and we do not believe that there is a reasonably possible
outcome materially in excess of our accrual.
For the remaining matters, where our historical experience with similar matters is of more limited value (i.e., “non-
pattern matters”), we evaluate matters primarily based on the individual facts and circumstances. For non-pattern
matters, we evaluate whether there is a reasonable possibility of a material loss in excess of any accrual that can be
estimated. Our estimate of reasonably possible loss in excess of our accruals for all material matters currently reflects
indirect tax and customs matters, for which we estimate the aggregate risk to be a range of up to about $2.9 billion.
As noted, the litigation process is subject to many uncertainties, and the outcome of individual litigated matters is not
predictable with assurance. Our assessments are based on our knowledge and experience, but the ultimate outcome of
any matter could require payment substantially in excess of the amount that we have accrued and/or disclosed.
Warranty
Estimated warranty costs are accrued for at the time the vehicle is sold to a dealer. Included in warranty cost accruals
are the costs for basic warranty coverages and field service actions (i.e., product recalls and owner notification programs)
on products sold. These costs are estimates based primarily on historical warranty claim experience. Warranty accruals
accounted for in Other liabilities and deferred revenue for the years ended December 31 were as follows (in millions):
2013 2012
Beginning balance $ 3,656 $ 3,915
Payments made during the period (2,302)(2,254)
Changes in accrual related to warranties issued during the period 2,025 1,885
Changes in accrual related to pre-existing warranties 625 49
Foreign currency translation and other (77) 61
Ending balance $ 3,927 $ 3,656
Excluded from the table above are costs accrued for customer satisfaction actions.