General Motors 2011 Annual Report Download - page 95

GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Effective changes in fair value of derivatives designated as cash flow hedges are recorded in Cash flow hedging gains (losses), net
within a separate component of Accumulated other comprehensive income. Amounts are reclassified from Accumulated other
comprehensive income when the underlying hedged item affects earnings. All ineffective changes in fair value are recorded in
earnings. We also discontinue hedge accounting prospectively when it is determined that a derivative instrument has ceased to be
effective as an accounting hedge or if the underlying hedged cash flow is no longer probable of occurring.
We enter into contracts with counterparties that we believe are creditworthy and generally settle on a net basis. We perform a
quarterly assessment of our counterparty credit risk, including a review of credit ratings, credit default swap rates and potential
nonperformance of the counterparty. Based on our most recent quarterly assessment of our counterparty credit risk, we consider this
risk to be low.
The cash flows from derivative instruments are classified in the same categories as the hedged items in the consolidated statement
of cash flows.
Foreign Currency Transactions and Translation
The assets and liabilities of foreign subsidiaries, that use the local currency as their functional currency, are translated to U.S.
Dollars based on the current exchange rate prevailing at each balance sheet date and any resulting translation adjustments are included
in Accumulated other comprehensive income. The assets and liabilities of foreign subsidiaries whose local currency is not their
functional currency are remeasured from their local currency to their functional currency, and then translated to U.S. Dollars.
Revenues and expenses are translated into U.S. Dollars using the average exchange rates prevailing for each period presented.
Gains and losses arising from foreign currency transactions and the effects of remeasurements discussed in the preceding
paragraph, are recorded in Automotive cost of sales and GM Financial operating and other expenses unless related to Automotive debt
which are recorded in Interest income and other non-operating income, net.
The following table summarizes the effects of foreign currency transactions and remeasurement (dollars in millions):
Successor Predecessor
Year Ended
December 31, 2011
Year Ended
December 31, 2010
July 10, 2009
Through
December 31, 2009
January 1, 2009
Through
July 9, 2009
Gain (loss) resulting from foreign currency transactions and
remeasurement .................................. $(55) $(210) $(755) $(1,077)
Recently Adopted Accounting Principles
In December 2010 the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2010-28,
“Intangibles — Goodwill and Other: When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or
Negative Carrying Amounts” (ASU 2010-28). The amendments in ASU 2010-28 modify Step 1 of the goodwill impairment test for
reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the
goodwill impairment test if it is more likely than not that a goodwill impairment exists. ASU 2010-28 is effective for fiscal years, and
interim periods within those years, beginning after December 15, 2010. Any resulting goodwill impairment is recorded as a
cumulative-effect adjustment to beginning Retained earnings at the date of adoption with future impairments recorded to earnings.
Refer to Note 12 for additional information on the adoption of ASU 2010-28 and its effect on the consolidated financial statements.
In September 2011 the FASB issued ASU 2011-08, “Testing Goodwill for Impairment” (ASU 2011-08). Under the revised
guidance entities testing for goodwill impairment have an option of performing a qualitative assessment before calculating the fair
value for the reporting unit, i.e., Step 1 of the goodwill impairment test. If an entity determines on a basis of qualitative factors that the
fair value of the reporting unit is more likely than not less than the carrying amount the first step of the two-step impairment test
General Motors Company 2011 Annual Report 93