General Motors 2010 Annual Report Download - page 243

GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
In July 2009 Old GM recorded adjustments resulting in a net decrease in valuation allowances of $20.7 billion as a result of the 363
Sale and fresh-start reporting. The net decrease primarily resulted from U.S. federal and state tax attribute reduction of $12.2 billion
related to debt cancellation income, a net difference of $5.5 billion between fresh-start reporting and historical U.S. GAAP bases of
assets and liabilities at entities with valuation allowances, net valuation allowances of $1.7 billion associated with assets and liabilities
retained by Old GM, a foreign tax attribute reduction of $0.9 billion and release of valuation allowances of $0.7 billion. After the
deconsolidation of our Saab unit in February 2009, corresponding deferred taxes and valuation allowances in Sweden were no longer
recorded in Old GM financial statements.
Old GM established or released the following significant valuation allowances for jurisdictions not on a full valuation allowance
throughout the applicable period (dollars in millions):
Predecessor
Jurisdiction(s)
Valuation Allowance
Charge/(Release) Period Ended
Brazil ..................................................................... $(465) July 9, 2009
Various non-U.S. ........................................................... $(286) July 9, 2009
South Korea ............................................................... $725 December 31, 2008
Various non-U.S. ........................................................... $329 December 31, 2008
Australia .................................................................. $284 December 31, 2008
Texas ..................................................................... $152 December 31, 2008
Spain ..................................................................... $206 March 31, 2008
United Kingdom ............................................................ $173 March 31, 2008
Over the past several years, we and Old GM have accumulated pre-tax losses in the U.S. and various non-U.S. jurisdictions. These
historical pre-tax losses were driven by several factors including but not limited to instability of the global economic environment,
automotive price competition, relatively high cost structure, unfavorable commodity prices, unfavorable regulatory and tax
environments and a challenging foreign currency exchange environment. By December 31, 2008, after weighing these objective and
verifiable negative evidence factors with all other available positive and negative evidence, Old GM determined it was more likely
than not it would not realize its net deferred tax assets, and established valuation allowances for major jurisdictions including the U.S.,
Canada, Brazil, Australia, South Korea, Germany, Spain and the United Kingdom. Additional concerns arose related to the U.S.
parent company’s liquidity which led us to establish valuation allowances for Texas and various non-U.S. jurisdictions, even though
many of these jurisdictions had historical profits and no other significant negative evidence factors.
In 2009 the U.S. parent company liquidity concerns were resolved in connection with the Chapter 11 Proceedings and the 363 Sale,
and many non-U.S. jurisdictions, including Brazil, were generating and projecting U.S. GAAP and local taxable income. To the extent
there were no other significant negative evidence factors, Old GM determined it was more likely than not it would realize its net
deferred tax assets and reversed valuation allowances in Brazil and various non-U.S. jurisdictions.
Although we are a new company, and our ability to achieve future profitability was enhanced by the cost and liability reductions
that occurred as a result of the Chapter 11 Proceedings and 363 Sale, Old GM’s historic operating results remain relevant as they are
reflective of the industry and the effect of economic conditions. The fundamental businesses and inherent risks in which we globally
operate did not change from those in which Old GM operated. As such, subsequent to the Chapter 11 Proceedings and the 363 Sale,
due to objective and verifiable negative evidence including cumulative and current losses, we determined it was still more likely than
not the net deferred tax assets would not be realized in major jurisdictions including the U.S., Canada, Australia, South Korea,
Germany, Spain and the United Kingdom.
At December 31, 2010 objective and verifiable negative evidence continues to outweigh positive evidence in our key valuation
allowance jurisdictions. If, in the future, we generate taxable income in jurisdictions where we have recorded full valuation
allowances, on a sustained basis, our conclusion regarding the need for full valuation allowances in these tax jurisdictions could
General Motors Company 2010 Annual Report 241