General Motors 2010 Annual Report Download - page 147

GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The accounting policies which follow are utilized by our automotive and automotive financing operations, unless otherwise
indicated.
Revenue Recognition
Automotive
Automotive sales are primarily composed of revenue generated from the sale of vehicles. Vehicle sales are recorded when title and
risks and rewards of ownership have passed, which is generally when a vehicle is released to the carrier responsible for transporting it
to a dealer and when collectability is reasonably assured. Provisions for recurring dealer and customer sales and leasing incentives,
consisting of allowances and rebates, are recorded as reductions to Automotive sales at the time of vehicle sales. All other incentives,
allowances, and rebates related to vehicles previously sold are recorded as reductions to Automotive sales when announced.
Vehicle sales to daily rental car companies with guaranteed repurchase obligations are accounted for as operating leases. Estimated
lease revenue is recorded ratably over the estimated term of the lease based on the difference between net sales proceeds and the
guaranteed repurchase amount. The difference between the cost of the vehicle and estimated residual value is depreciated on a
straight-line basis over the estimated term of the lease.
Sales of parts and accessories to GM dealers are recorded when the goods arrive at the dealership and when collectability is
reasonably assured. Sales of aftermarket products and powertrain components are recorded when title and risks and rewards of
ownership have passed, which is generally when the product is released to the carrier responsible for transporting them to the
customer and when collectability is reasonably assured.
Revenue from OnStar, comprised of customer subscriptions related to comprehensive in-vehicle security, communications and
diagnostic systems, is deferred and recorded on a straight-line basis over the subscription period. An OnStar subscription is provided
as part of the sale or lease of certain vehicles. The fair value of the subscription is recorded as deferred revenue when a vehicle is sold,
and amortized over the subscription period. Prepaid minutes for the Hands-Free Calling system are deferred and recorded on a
straight-line basis over the life of the contract.
Payments received from banks for credit card programs in which there is a redemption liability are recorded on a straight-line basis
over the estimated period of time the customer will accumulate and redeem their rebate points. This time period is estimated to be 60
months for the majority of the credit card programs. This redemption period is reviewed periodically to determine if it remains
appropriate. The redemption liability anticipated to be paid to the dealer is estimated and accrued at the time specific vehicles are sold
to the dealer. The redemption cost is classified as a reduction of Automotive sales.
Automotive Financing
Finance income earned on receivables is recognized using the effective interest method. Fees and commissions (including incentive
payments) received and direct costs of originating loans are deferred and amortized over the term of the related finance receivables
using the effective interest method and are removed from the consolidated balance sheets when the related finance receivables are
sold, charged off or paid in full. Accrual of finance charge income is suspended on accounts that are more than 60 days delinquent,
accounts in bankruptcy, and accounts in repossession.
Income from operating lease assets, which includes lease origination fees, net of lease origination costs, is recorded as operating
lease revenue on a straight-line basis over the term of the lease agreement.
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