General Motors 2010 Annual Report Download - page 131

GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Additional Modifications to Pension and Other Postretirement Plans Contingent upon the Completion of the 363 Sale
We modified the U.S. hourly pension plan, the U.S. executive retirement plan, the U.S. salaried life plan, the non-UAW hourly
retiree medical plan and the U.S. hourly life plan. These modifications became effective upon the completion of the 363 Sale. The key
modifications were:
• Elimination of the post 65 benefits and capping the pre 65 benefits in the non-UAW hourly retiree medical plan;
• Capping the life benefit for non-UAW retirees and future retirees at $10,000 in the U.S. hourly life plan;
• Capping the life benefit for existing salaried retirees at $10,000, reduced the retiree benefit for future salaried retirees and
eliminated the executive benefit for the U.S. salaried life plan;
• Elimination of a portion of nonqualified benefits in the U.S. executive retirement plan; and
• Elimination of the flat monthly special lifetime benefit of $66.70 that was to commence on January 1, 2010 for the U.S. hourly
pension plan.
Accounting for the Effects of the Chapter 11 Proceedings and the 363 Sale
Chapter 11 Proceedings
Accounting Standards Codification (ASC) 852, “Reorganizations,” (ASC 852) is applicable to entities operating under Chapter 11
of the Bankruptcy Code. ASC 852 generally does not affect the application of U.S. GAAP that we and Old GM followed to prepare
the consolidated financial statements, but it does require specific disclosures for transactions and events that were directly related to
the Chapter 11 Proceedings and transactions and events that resulted from ongoing operations.
Old GM prepared its consolidated financial statements in accordance with the guidance in ASC 852 in the period June 1, 2009
through July 9, 2009. Revenues, expenses, realized gains and losses, and provisions for losses directly related to the Chapter 11
Proceedings were recorded in Reorganization gains, net. Reorganization gains, net do not constitute an element of operating loss due
to their nature and due to the requirement of ASC 852 that they be reported separately. Old GM’s balance sheet prior to the 363 Sale
distinguished prepetition liabilities subject to compromise from prepetition liabilities not subject to compromise and from postpetition
liabilities. Cash amounts provided by or used in the Chapter 11 Proceedings are separately disclosed in the statement of cash flows.
Application of Fresh-Start Reporting
The Bankruptcy Court did not determine a reorganization value in connection with the 363 Sale. Reorganization value is defined as
the value of our assets without liabilities. In order to apply fresh-start reporting, ASC 852 requires that total postpetition liabilities and
allowed claims be in excess of reorganization value and prepetition stockholders receive less than 50.0% of our common stock. Based
on our estimated reorganization value, we determined that on July 10, 2009 both the criteria of ASC 852 were met and, as a result, we
applied fresh-start reporting.
Our reorganization value was determined using the sum of:
• Our discounted forecast of expected future cash flows from our business subsequent to the 363 Sale, discounted at rates
reflecting perceived business and financial risks;
• The fair value of operating liabilities;
• The fair value of our non-operating assets, primarily our investments in nonconsolidated affiliates and cost method
investments; and
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