General Motors 2013 Annual Report Download - page 86

GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
with GM India’s declining operations. These charges were recorded in our GMIO segment primarily in Automotive cost of sales.
Refer to Note 9 for additional information regarding the triggering events of the impairment charge in India and information on the
impairment of Property, net.
Withdrawal of the Chevrolet Brand from Europe
In the three months ended December 31, 2013 we recorded impairment charges of $264 million to adjust the carrying amounts of
Intangible assets, net, primarily dealer network intangibles, to fair value because we are winding down the dealer network in 2014 and
we expect to incur losses during the wind-down period. These charges were recorded in our GMIO segment in Automotive cost of
sales. Refer to Note 19 for additional information on the withdrawal of the Chevrolet brand from Europe.
Year Ended December 31, 2012
We adjusted the carrying amount of the GME intangible assets to their fair value of $139 million and recorded asset impairment
charges of $1.8 billion at December 31, 2012. These charges were recorded in our GME segment with $1.6 billion recorded in
Automotive selling, general and administrative expense and $0.2 billion recorded in Automotive cost of sales. The fair value estimates
for GME’s intangible assets are based on a valuation premise that assumes the assets’ highest and best use are different than their
current use due to the overall European macro-economic environment.
Our recoverability test of the GME asset group includes real and personal property, resulting in additional impairment charges of
$3.7 billion, for total impairment charges of $5.5 billion. Refer to Note 9 for additional information regarding the impairment of real
and personal property.
To determine the estimated fair value of the brand intangible assets we used the relief from royalty method which is a form of the
income approach. Under this approach revenue associated with the brand is projected over the expected remaining useful life of the
asset. A royalty rate is then applied to estimate the royalty savings. The royalty rate used was based on an analysis of empirical,
market-derived royalty rates for guideline intangible assets and a profit split analysis to determine a rate that is economically
supported by GME’s forecasted profitability. The net after-tax royalty savings are calculated for each year during the remaining
economic life of the asset and discounted to present value.
To determine the estimated fair value of the dealer network we used the cost approach with adjustments in value for the
overcapacity of dealers and the sales environment in the region. We determined the fair value to be $0.
The following table summarizes the significant Level 3 inputs for brand intangible assets measurements:
Valuation Technique Unobservable Input(s) Percentage
Brand intangible assets ........................................... Income approach Long-term growth rate 0.50%
Pre-tax royalty rate (a) 0.14%
Discount rate (b) 21.25%
(a) Represents estimated savings realized from owning the asset or having the royalty-free right to use the asset.
(b) Represents WACC adjusted for perceived business risks related to these intangible assets.
Note 12. Variable Interest Entities
Consolidated VIEs
Automotive
VIEs that we do not control through a majority voting interest that are consolidated because we are the primary beneficiary include
certain vehicle assembling, manufacturing and selling venture arrangements, the most significant of which is GM Egypt. At
December 31, 2013 and 2012: (1) Total assets of these VIEs were $564 million and $436 million, which were composed of Cash and
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2013 ANNUAL REPORT