General Motors 2010 Annual Report Download - page 105

GENERAL MOTORS COMPANY AND SUBSIDIARIES
Due to the contractual terms of our residual support and risk sharing agreements with Ally Financial, which currently limit our
maximum obligation to Ally Financial should vehicle residual values decrease, an increase in sales proceeds does not have the
equivalent offsetting effect on our residual support and risk sharing reserves as a decrease in sales proceeds.
The following table summarizes the maximum obligation and recorded receivables and liabilities associated with the contractual
terms of our residual support and risk sharing agreements with Ally Financial (dollars in millions):
Successor
December 31, 2010 December 31, 2009
Maximum obligation
Residual support .............................................................. $523 $1,159
Risk sharing agreements ........................................................ $692 $1,392
Outstanding receivables (liabilities)
Residual support .............................................................. $ 24 $ (369)
Risk sharing agreements ........................................................ $(269) $ (366)
When a lease vehicle is returned or repossessed by us, the asset is recorded at the lower of cost or estimated selling price, less cost
to sell.
Impairment of Goodwill
Goodwill arises from the application of fresh-start reporting and acquisitions accounted for as business combinations. Goodwill is
tested for impairment in the fourth quarter of each year for all reporting units, or more frequently if events occur or circumstances
change that would warrant such a review. An impairment charge is recorded for the amount, if any, by which the carrying amount of
goodwill exceeds its implied value. Our reporting units are GMNA, GME, GM Financial and various reporting units within the GMIO
and GMSA segments. Due to the integrated nature of our manufacturing operations and the sharing of vehicle platforms among
brands, assets and other resources are shared extensively within GMNA and GME and financial information by brand or country is
not discrete below the operating segment level such that GMNA and GME do not contain reporting units below the operating segment
level. GM Financial also does not contain reporting units below the operating segment level. GMIO and GMSA are less integrated
given the lack of regional trade pacts and other unique geographical differences and thus contain separate reporting units below the
operating segment level.
At December 31, 2010 we had goodwill of $31.8 billion, which predominately arose upon the application of fresh-start reporting and
the acquisition of AmeriCredit. When applying fresh-start reporting, certain accounts, primarily employee benefit and income tax
related, were recorded at amounts determined under specific U.S. GAAP rather than fair value, and the difference between the U.S.
GAAP and fair value amounts gives rise to goodwill, which is a residual. Our employee benefit related accounts were recorded in
accordance with ASC 712 and ASC 715 and deferred income taxes were recorded in accordance with ASC 740. Further, we recorded
valuation allowances against certain of our deferred tax assets, which under ASC 852 also resulted in goodwill. If all identifiable
assets and liabilities had been recorded at fair value upon application of fresh-start reporting, no goodwill would have resulted. In
conjunction with the acquisition of GM Financial in October 2010, we recorded $1.3 billion of acquisition related goodwill, including
$153 million recorded at the acquisition-date to establish a valuation allowance for deferred taxes which was not applicable to GM
Financial on a stand-alone basis.
In the future, we have an increased likelihood of measuring goodwill for possible impairment during our annual or event-driven
goodwill impairment testing and in evaluating whether it is more likely than not that a goodwill impairment exists for reporting units
with zero or negative carrying values. An event-driven impairment test is required if it is more likely than not that the fair value of a
reporting unit is less than its net book value. Because our reporting units were recorded at their fair values upon application of fresh-
start reporting, it is more likely a decrease in the fair value of our reporting units from their fresh-start reporting values could occur,
and such a decrease would trigger the need to measure for possible goodwill impairments. Refer to Note 4 to our consolidated
financial statements for additional information related to the adoption of ASU 2010-28, “Intangibles, Goodwill and Other: When to
Perform Step 2 of the Goodwill Impairment Test for Reporting Units.”
General Motors Company 2010 Annual Report 103