Ford 2014 Annual Report Download - page 119

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
For each accounting topic that is addressed in its own footnote, the description of the accounting policy may be found
in the related footnote. Other significant accounting policies are described below.
Use of Estimates
The preparation of financial statements requires us to make estimates and assumptions that affect our results during
the periods reported. Estimates are used to account for certain items such as marketing accruals, warranty costs,
employee benefit programs, etc. Estimates are based on assumptions that we believe are reasonable under the
circumstances. Due to the inherent uncertainty involved with estimates, actual results may differ.
Foreign Currency
We remeasure monetary assets and liabilities denominated in a currency that is different from a reporting entity’s
functional currency from the applicable currency to the legal entity’s functional currency. The effect of this remeasurement
process, and the results of our foreign currency hedging activities are reported in Automotive cost of sales, Selling,
administrative, and other expenses, and Automotive interest income and other income, net. The pre-tax losses for this
activity were $510 million, $349 million, and $426 million, for the years ended 2014, 2013, and 2012, respectively.
We translate the assets and liabilities of our foreign subsidiaries from their respective functional currencies to
U.S. dollars using end-of-period exchange rates. Generally, our foreign subsidiaries use the local currency as their
functional currency. Changes in the carrying value of these assets and liabilities attributable to fluctuations in exchange
rates are recognized in Foreign currency translation, a component of Other comprehensive income/(Ioss). Upon sale or
upon complete or substantially complete liquidation of an investment in a foreign subsidiary, the amount of accumulated
foreign currency translation related to the entity is reclassified to Net income and recognized as part of the gain or loss on
the investment.
Restricted Cash
Cash and cash equivalents that are restricted as to withdrawal or use under the terms of certain contractual
agreements are recorded in Other assets on our balance sheet. Our Automotive sector restricted cash balances primarily
include various escrow agreements related to legal, insurance, customs, and environmental matters. Our Financial
Services sector restricted cash balances primarily include cash held to meet certain local governmental and regulatory
reserve requirements and cash held under the terms of certain contractual agreements. Restricted cash does not include
required minimum balances or cash securing debt issued through securitization transactions.
Trade Receivables
Trade receivables, recorded on our consolidated balance sheet in Other receivables, net, consist primarily of
Automotive sector receivables for vehicles, parts, and accessories. Trade receivables initially are recorded at the
transaction amount. We record an allowance for doubtful accounts representing our estimate of the probable losses.
Each reporting period, we assess the adequacy of our allowance for doubtful accounts taking into consideration
recoveries received during that period. Additions to the allowance for doubtful accounts are made by recording charges to
bad debt expense reported in Automotive cost of sales. Receivables are charged to the allowance for doubtful accounts
when an account is deemed to be uncollectible.
Net Intangible Assets
We capitalize and amortize our finite-lived intangible assets over their estimated useful lives. Indefinite-lived
intangible assets are not amortized, but are tested for impairment annually or more frequently if events or circumstances
indicate the assets may be impaired. Our intangible assets are comprised primarily of license and advertising
agreements, land rights, patents, customer contracts, and technology. Our indefinite-lived intangibles have been tested
for impairment in 2014 and no impairment was required.
The net carrying amount of our intangible asset was $133 million and $85 million at December 31, 2014 and 2013,
respectively, and is reported in Other assets on our balance sheet. Amortization was, and is expected to be, less than
$25 million a year through 2019.
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