General Motors 2012 Annual Report Download - page 81

GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Allowance for Doubtful Accounts
Automotive
The following table summarizes activity in our allowance for doubtful accounts (dollars in millions):
Years Ended December 31,
2012 2011 2010
Balance at beginning of period .............................................................. $331 $252 $250
Amounts charged (credited) to costs and expenses ............................................... (10) 159 93
Other .................................................................................. 36 3 —
Deductions .............................................................................. (46) (83) (91)
Balance at end of period ................................................................... $311 $331 $252
Fair Value Measurements
A three-level valuation hierarchy, based upon observable and unobservable inputs, is used for fair value measurements. Observable
inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions based on the best
evidence available. These two types of inputs create the following fair value hierarchy:
• Level 1 — Quoted prices for identical instruments in active markets;
• Level 2 —Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets
that are not active; and model-derived valuations whose significant inputs are observable; and
• Level 3 — Instruments whose significant inputs are unobservable.
Financial instruments are transferred in and/or out of Level 1, 2 or 3 at the beginning of the accounting period in which there is a
change in the valuation inputs.
Marketable Securities
We classify marketable securities as available-for-sale or trading. Various factors, including turnover of holdings and investment
guidelines, are considered in determining the classification of securities. Available-for-sale securities are recorded at fair value with
unrealized gains and losses recorded, net of related income taxes, in Accumulated other comprehensive income until realized. Trading
securities are recorded at fair value with changes in fair value recorded in Interest income and other non-operating income, net. We
determine realized gains and losses for all securities using the specific identification method.
We measure the fair value of our marketable securities using a market approach where identical or comparable prices are available,
and an income approach in other cases. Securities are classified in Level 1 when quoted prices in an active market for identical
securities are available. If quoted market prices are not available, fair values of securities are determined using prices from a pricing
service, pricing models, quoted prices of securities with similar characteristics or discounted cash flow models and are generally
classified in Level 2. These prices represent non-binding quotes. U.S. government and agency securities, sovereign debt, certificates
of deposit, and corporate debt securities are classified as Level 2. Our pricing vendor utilizes industry-standard pricing models that
consider various inputs, including benchmark yields, reported trades, broker/dealer quotes, issuer spreads and benchmark securities as
well as other relevant economic measures. We conduct an annual review of our pricing service. This review includes discussion and
analysis of the inputs used by the pricing service to provide prices for the types of securities we hold. These inputs include prices for
comparable securities, bid/ask quotes, interest rate yields, and prepayment speeds. Based on our review we believe the prices received
from our pricing service are a reliable representation of exit prices. Securities are classified in Level 3 in certain cases where there are
unobservable inputs to the valuation in the marketplace. Level 3 financial instruments typically include, in addition to the
unobservable inputs, observable components that are validated to external sources.
General Motors Company 2012 ANNUAL REPORT78