General Motors 2010 Annual Report Download - page 229

GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Net Change in Accumulated Other Comprehensive Income (Loss)
The following table summarizes the net change in Accumulated other comprehensive income (loss) related to cash flow hedging
activities (dollars in millions):
Predecessor
January 1, 2009
Through
July 9, 2009
Year Ended
December 31, 2008
Beginning net unrealized gain (loss) on derivatives ....................................... $(490) $ 321
Change in fair value ............................................................... — (1,054)
Reclassification to earnings .......................................................... 99 243
Ending net unrealized gain (loss) on derivatives ......................................... $(391) $ (490)
In connection with our application of fresh-start reporting, the remaining previously deferred cash flow hedging gains and losses of
$391 million in Accumulated other comprehensive income (loss) were adjusted to $0 at July 10, 2009.
Fair Value Hedges
Old GM previously used interest rate swaps designated as fair value hedges to manage certain of its exposures associated with its
borrowings. Old GM hedged its exposures to the maturity date of the underlying interest rate exposure.
Gains and losses on derivatives designated and qualifying as fair value hedges, as well as the offsetting gains and losses on the debt
attributable to the hedged interest rate risk, were recorded in Automotive interest expense to the extent the hedge was effective. The
gains and losses related to the hedged interest rate risk were recorded as an adjustment to the carrying amount of the debt. Previously
recorded adjustments to the carrying amount of the debt were amortized to Automotive interest expense over the remaining debt term.
In the period January 1, 2009 through July 9, 2009 Old GM amortized an insignificant amount of previously deferred fair value hedge
gains and losses to Automotive interest expense. Old GM recorded no hedging ineffectiveness in the year ended December 31, 2008.
On October 1, 2008 Old GM ceased hedge accounting treatment for derivatives that were previously designated as qualifying fair
value hedges. Subsequent to this date Old GM recorded gains and losses arising from changes in the fair value of the derivative
instruments in earnings, resulting in a net gain of $279 million recorded in Automotive interest expense in the three months ended
December 31, 2008.
In connection with the Chapter 11 Proceedings, at June 1, 2009 Old GM had basis adjustments of $18 million to the carrying
amount of debt that ceased to be amortized to Automotive interest expense. At June 1, 2009 the debt related to these basis adjustments
was classified as Liabilities subject to compromise and no longer subject to interest accruals or amortization. We did not assume this
debt from Old GM in connection with the 363 Sale.
Net Investment Hedges
Old GM was subject to foreign currency exposure related to net investments in certain foreign operations and used foreign currency
denominated debt to hedge this exposure. For nonderivative instruments that were designated as, and qualified as, a hedge of a net
investment in a foreign operation, the effective portion of the unrealized and realized gains and losses were recorded as a Foreign
currency translation adjustment in Accumulated other comprehensive income (loss). In connection with the 363 Sale, MLC retained
the foreign currency denominated debt and it ceased to operate as a hedge of net investments in foreign operations. In connection with
our application of fresh-start reporting, the effective portions of unrealized gains and losses previously recorded to Accumulated other
comprehensive income (loss) were adjusted to $0 at July 10, 2009.
General Motors Company 2010 Annual Report 227