General Motors 2014 Annual Report Download - page 74

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GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
unrealized gains and losses recorded net of related income taxes in Accumulated other comprehensive loss 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. 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. These
prices represent non-binding quotes. Our pricing service utilizes industry-standard pricing models that consider various inputs. We
conduct an annual review of our pricing service. Based on our review we believe the prices received from our pricing service are a
reliable representation of exit prices.
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 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 acquisitions of GM Financial or 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 is 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 from when a loss event first occurs to when the receivable is charged-off.
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