General Motors 2011 Annual Report Download - page 57

GENERAL MOTORS COMPANY AND SUBSIDIARIES
through a liquid credit default swap market we based this measurement on an analysis of comparable industrial companies to
determine the appropriate credit spread which would be applied to us and Old GM by market participants. In the three months
ended December 31, 2010 we incorporated our published credit agency ratings into our credit rating conclusions. In the three
months ended December 31, 2010 we determined that our nonperformance risk no longer represents a significant input in the
determination of the fair value of our foreign currency derivative liabilities. The effect of our nonperformance risk in the
valuation has been reduced due to the reduction in the remaining duration and magnitude of these net derivative liability
positions. We transferred these liabilities to Level 2. At December 31, 2011 our nonperformance risk remains unobservable
through a liquid credit default swap market.
Refer to Note 19 to our consolidated financial statements for additional information regarding Level 3 measurements.
Level 3 Assets and Liabilities
At December 31, 2011 assets and liabilities measured using Level 3 inputs increased $64 million from a net liability of $14 million
to a net asset of $50 million. This increase was due to unrealized and realized gains on embedded derivatives, partially offset by
unrealized losses on options.
At December 31, 2010 assets and liabilities measured using Level 3 inputs decreased $658 million from a net liability of $672
million to a net liability of $14 million. This reduction was due to unrealized and realized gains on derivatives, the settlement of
derivative positions according to their terms and maturities and the reclassification of outstanding derivative contracts from Level 3 to
Level 2 during the three months ended December 31, 2010. In October 2010 we transferred foreign currency derivatives with a fair
market value of $183 million from Level 3 to Level 2.
Realized gains and losses related to assets and liabilities measured using Level 3 inputs did not have a material effect on operations,
liquidity or capital resources in the years ended December 31, 2011 and 2010 and the periods July 10, 2009 through December 31,
2009 and January 1, 2009 through July 9, 2009.
Automotive Financing — GM Financial
At December 31, 2011 and 2010 assets and liabilities classified in Level 3, with the related Level 3 inputs, are as follows:
• Interest rate swaps — Level 3 inputs are used to determine the fair value of GM Financial’s interest rate swaps because they
are traded in over-the-counter markets where quoted market prices are not readily available. The fair value of derivatives is
derived using models that primarily use market observable inputs, such as interest rate yield curves and credit curves. The
effects of GM Financial’s and the counterparties’ non-performance risk to the derivative trades is considered when measuring
the fair value of derivative assets and liabilities.
Refer to Note 19 to our consolidated financial statements for additional information regarding fair value measurements.
Dividends
The declaration of any dividend on our common stock is a matter to be acted upon by our Board of Directors in its sole discretion.
Since our formation we have not paid any dividends on our common stock and have no current plans to pay any dividends on our
common stock. Our payment of dividends on our common stock in the future, if any, will be determined by our Board of Directors in
its sole discretion out of funds legally available for that purpose and will depend on business conditions, our financial condition,
earnings, liquidity and capital requirements, the covenants in our debt instruments and other factors.
So long as any share of our Series A or B Preferred Stock remains outstanding, no dividend or distribution may be declared or paid
on our common stock unless all accrued and unpaid dividends have been paid on our Series A and B Preferred Stock, subject to
exceptions, such as dividends on our common stock payable solely in shares of our common stock. Our secured revolving credit
facility contains certain restrictions on our ability to pay dividends, subject to exceptions, such as dividends payable solely in shares of
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