General Motors 2014 Annual Report Download - page 94

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GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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
Automotive Financing — GM Financial Consolidated VIEs
GM Financial uses special purpose entities (SPEs) that are considered VIEs to issue variable funding notes to third party bank-
sponsored warehouse facilities or asset-backed securities to investors in securitization transactions. The debt issued by these VIEs is
backed by the cash flows related to finance receivables and leasing related assets transferred by GM Financial to the VIEs (Securitized
Assets). GM Financial holds variable interests in the VIEs that could potentially be significant to the VIEs. GM Financial determined
that they are the primary beneficiary of the SPEs because: (1) the servicing responsibilities for the Securitized Assets give GM
Financial the power to direct the activities that most significantly impact the performance of the VIEs; and (2) the variable interests in
the VIEs give GM Financial the obligation to absorb losses and the right to receive residual returns that could potentially be
significant. The assets and liabilities of the VIEs are included in GM Financial’s consolidated balance sheets. The following table
summarizes the assets and liabilities related to GM Financial’s consolidated VIEs prior to intercompany eliminations (dollars in
millions):
December 31, 2014 December 31, 2013
Restricted cash ................................................................. $ 1,721 $ 1,523
Securitized Assets ............................................................... $ 27,704 $ 23,584
Securitization notes payable and other credit facilities ................................... $ 22,794 $ 19,448
The assets of the VIEs and the restricted cash held by GM Financial serve as the sole source of repayment for the debt issued by
these entities. Restricted cash represents collections from the underlying Securitized Assets and certain reserve accounts held as credit
enhancement for securitizations held by GM Financial for the benefit of the noteholders. An additional form of credit enhancement is
provided in the form of overcollateralization, whereby more loans or leases are transferred to the VIEs than the amount of asset-
backed securities issued by the VIEs. GM Financial also maintains an allowance for estimated probable credit losses on securitized
receivables. Cash pledged is invested in highly liquid securities with original maturities of 90 days or less.
Investors in the notes issued by the VIEs do not have recourse to GM Financial or its other assets, with the exception of customary
representation and warranty repurchase provisions and indemnities that GM Financial provides as the servicer. GM Financial is not
required and does not currently intend to provide additional financial support to these SPEs. While these subsidiaries are included in
GM Financial’s consolidated financial statements, these subsidiaries are separate legal entities and their assets are legally owned by
them and are not available to GM Financial’s creditors.
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