General Motors 2015 Annual Report Download - page 64

Table of Contents
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the vehicles under prevailing market conditions. The adequacy of the estimate of the residual value is evaluated over the life of the lease and adjustments
may be made to the extent the expected value of the vehicle at lease termination changes. Adjustments may be in the form of revisions to the depreciation
rate or recognition of an impairment charge. Impairment is determined to exist if an impairment indicator exists and the expected future cash flows, which
include estimated residual values, are lower than the carrying amount of the vehicles leased. If the carrying amount is considered impaired an impairment
charge is recorded for the amount by which the carrying amount exceeds fair value. Fair value is determined primarily using the anticipated cash flows,
including estimated residual values.
In our automotive operations when a leased vehicle is returned the asset is reclassified from Equipment on operating leases, net to Inventories at the lower
of cost or estimated selling price, less cost to sell. Upon disposition proceeds are recorded in Automotive net sales and revenue and costs are recorded in
Automotive cost of sales. In our automotive finance operations when a leased vehicle is returned or repossessed the asset is recorded in Other assets at the
lower of cost or estimated selling price, less costs to sell. Upon disposition a gain or loss is recorded in GM Financial interest, operating and other expenses
for any difference between the net book value of the leased asset and the proceeds from the disposition of the asset.
Depreciation expense and impairment charges related to Equipment on operating leases, net are recorded in Automotive cost of sales or GM Financial
interest, operating and other expenses.
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When events and circumstances warrant, investments accounted for under the cost or equity method of accounting are evaluated for impairment. An
impairment charge is recorded whenever a decline in value of an investment below its carrying amount is determined to be other-than-temporary. Impairment
charges related to equity method investments are recorded in Equity income. Impairment charges related to cost method investments are recorded in Interest
income and other non-operating income, net.
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Property, plant and equipment, including internal use software, is recorded at cost. Major improvements that extend the useful life or add functionality are
capitalized. The gross amount of assets under capital leases is included in property, plant and equipment. Expenditures for repairs and maintenance are
charged to expense as incurred. We depreciate all depreciable property using the straight-line method. Leasehold improvements are amortized over the period
of lease or the life of the asset, whichever is shorter. The amortization of the assets under capital leases is included in depreciation expense. Upon retirement
or disposition of property, plant and equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss
is recorded in earnings. Impairment charges related to property are recorded in Automotive cost of sales, Automotive selling, general and administrative
expense or GM Financial interest, operating and other expenses.
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Special tools represent product-specific powertrain and non-powertrain related tools, dies, molds and other items used in the vehicle manufacturing
process. Expenditures for special tools are recorded at cost and are capitalized. We amortize special tools over their estimated useful lives using the straight-
line method or an accelerated amortization method based on their historical and estimated production volume. Impairment charges related to special tools are
recorded in Automotive cost of sales.
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Goodwill is tested for impairment for all reporting units on an annual basis as of October 1, or more frequently if events occur or circumstances change that
would warrant such a review. When performing our goodwill impairment testing, the fair values of our reporting units are determined based on valuation
techniques using the best available information, primarily discounted cash flow projections. We make significant assumptions and estimates, which utilize
Level 3 inputs, about the extent and timing of future cash flows, growth rates, market share and discount rates that represent unobservable inputs into our
valuation methodologies. Our fair value estimates for annual and event-driven impairment tests assume the achievement of the future financial results
contemplated in our forecasted cash flows and there can be no assurance that we will realize that value. Because the fair value of goodwill can be measured
only as a residual amount and cannot be determined directly we calculate the implied goodwill for those reporting units failing Step 1 in the same manner
that goodwill is recognized in a business combination pursuant to Accounting Standards Codification (ASC) 805.
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