General Motors 2012 Annual Report Download - page 143

GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2011
Derivative Assets Derivative Liabilities
Notional Current (a) Non-Current (b) Current (c) Non-Current (d)
Foreign currency ....................................... $ 6,507 $ 64 $ — $46 $—
Commodity ........................................... 2,566 9 — 10 5
Embedded ............................................ 1,461 28 124 1 5
Total ................................................ $10,534 $101 $124 $57 $10
(a) Recorded in Other current assets.
(b) Recorded in Other assets.
(c) Recorded in Accrued liabilities.
(d) Recorded in Other liabilities and deferred income taxes.
December 31, 2012 December 31, 2011
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Assets
Foreign currency ........................................ $— $118 $— $118 $— $64 $ — $ 64
Commodity ............................................ — 9 11 20 — 9 — 9
Embedded ............................................. — 2 26 28 — 4 148 152
Total .................................................. $— $129 $37 $166 $— $77 $148 $225
Liabilities
Foreign currency ........................................ $— $ 19 $— $ 19 $— $46 $ — $ 46
Commodity ............................................ — 7 — 7 — 5 10 15
Embedded ............................................. — 1 — 1 — 6 — 6
Total .................................................. $— $ 27 $— $ 27 $— $57 $ 10 $ 67
We measure the fair value of our portfolio of foreign currency, commodity and embedded derivatives using industry accepted
models. The significant Level 2 inputs used in the valuation of our derivatives include spot rates, forward rates, volatility and interest
rates. These inputs are obtained from pricing services, broker quotes and other sources.
We entered into a power plant lease agreement which included the purchase of natural gas at a fixed price adjusted for movements
in heavy fuel oil and coal indices as published by a German governmental agency. The natural gas agreement was determined to be a
derivative for accounting purposes and is valued as a forward contract utilizing Level 3 inputs. The significant unobservable inputs
used in the fair value measurement of our commodity derivative are coal and heavy fuel oil forward rates and supplier credit spreads.
Significant increases (decreases) in the coal and heavy fuel oil index and supplier credit spread would result in significant decreases
(increases) to the fair value measurement.
We are party to a long-term supply agreement which provides for pricing to be partially denominated in a currency other than the
functional currency of the parties to the contract. This pricing feature was determined to be an embedded derivative which we have
bifurcated for valuation and accounting purposes. This embedded derivative is valued using an industry accepted model which
contains Level 3 inputs.
The significant unobservable inputs used in the fair value measurement of our embedded foreign currency derivative is the estimate
of the Turkish central bank’s Euro/Turkish Lira (TRY) forward exchange rate and monthly volume commitment and vehicle mix.
Significant decreases (increases) to the Euro/TRY forward exchange rate and monthly volume commitment and vehicle mix would
result in significant decreases (increases) to the fair value measurement.
General Motors Company 2012 ANNUAL REPORT140