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GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
An evaluation is made quarterly to determine if unrealized losses related to non-trading investments in securities are other-than-
temporary. Factors considered in determining whether a loss on a marketable security is other-than-temporary include: (1) the length
of time and extent to which the fair value has been below cost; (2) the financial condition and near-term prospects of the issuer; and
(3) the intent to sell or likelihood to be forced to sell the security before any anticipated recovery.
Finance Receivables
As the result of our October 2010 acquisition of GM Financial and GM Financial’s acquisition of the Ally Financial, Inc. (Ally
Financial) international operations, finance receivables are reported in two portfolios: pre-acquisition and post-acquisition portfolios.
The pre-acquisition finance receivables portfolio consists of finance receivables that were considered to have had deterioration in
credit quality at the time they were acquired with the acquisition of GM Financial or the acquisition of the Ally Financial international
operations. The pre-acquisition portfolio will decrease over time with the amortization of the acquired receivables. The post-
acquisition finance receivables portfolio consists of finance receivables that were considered to have had no deterioration in credit
quality at the time they were acquired with the acquisition of the Ally Financial international operations and finance receivables
originated since the acquisitions of GM Financial and the Ally Financial international operations. The post-acquisition portfolio is
expected to grow over time as GM Financial originates new receivables.
Pre-Acquisition Consumer Finance Receivables
At the time of acquisitions the receivables were recorded at fair value. The pre-acquisition finance receivables were acquired at a
discount, which contains two components: a non-accretable difference and an accretable yield. The accretable yield is recorded as
finance charge income over the life of the acquired receivables.
Any deterioration in the performance of the pre-acquisition finance receivables from their expected performance will result in an
incremental provision for loan losses. Improvements in the performance of the pre-acquisition finance receivables will result first in
the reversal of any incremental related allowance for loan losses and then in a transfer of the excess from the non-accretable
difference to accretable yield, which will be recorded as finance charge income over the remaining life of the receivables.
Post-Acquisition Consumer Finance Receivables and Allowance for Loan Losses
Post-acquisition finance receivables originated since the acquisitions of GM Financial and the Ally Financial international
operations are carried at amortized cost, net of allowance for loan losses.
The component of the allowance for consumer finance receivables that are collectively evaluated for impairment is based on a
statistical calculation supplemented by management judgment. GM Financial uses a combination of forecasting models to determine
the allowance for loan losses. Factors that are considered when estimating the allowance include loss confirmation period, historical
delinquency migration to loss, probability of default and loss given default. The loss confirmation period is a key assumption within
the models, which represents the average amount of time between when a loss event first occurs to when the receivable is charged-off.
Consumer finance receivables that become classified as troubled debt restructurings (TDRs) are separately assessed for impairment.
A specific allowance is estimated based on the present value of the expected future cash flows of the receivable discounted at the
loan’s original effective interest rate.
The finance receivables acquired with Ally Financial international operations that were considered to have no deterioration in credit
quality at the time of acquisition were recorded at fair value. The purchase discount will accrete to income over the life of the
receivables, based on contractual cash flows, using the effective interest method. Provisions for loan losses are charged to operations
in amounts equal to net credit losses for the period. Any subsequent deterioration in the performance of the acquired receivables will
result in an incremental provision for loan losses.
62
2013 ANNUAL REPORT