Ally Bank 2011 Annual Report Download - page 196

Table of Contents
Notes to Consolidated Financial Statements
Ally Financial Inc. • Form 10−K
The following table summarizes derivative instruments used in cash flow hedge accounting relationships and net investment hedge accounting
relationships.
Year ended December 31, ($ in millions) 2011 2010 2009
Cash flow hedges
Interest rate contracts
Gain recorded directly to interest on long−term debt (a) $ 5 $ — $ —
Foreign exchange contracts
Gain recognized in other comprehensive income (b) — 4 10
Net investment hedges
Foreign exchange contracts
(Loss) gain reclassified from accumulated other comprehensive income to other income, net of losses $ (8) $ 12 $ —
Loss recorded directly to other income, net of losses (c) (3) (18) —
Total other income, net of losses $ (11) $ (6) $ —
Gain (loss) recognized in other comprehensive income (d) $ 173 $ (183) $ (32)
(a) The amount represents hedge ineffectiveness and excludes interest losses of $5 million for the year ended December 31, 2011.
(b) The amount for the year ended December 31, 2010, represents gains of $111 million related to the effective portion of cash flow hedges offset by the reclassification of accumulated
gains totaling $107 million from accumulated other comprehensive income on our Consolidated Balance Sheet to other income, net of losses in the Consolidated Statement of
Income. The amount for the year ended December 31, 2009, represents losses of $18 million related to the effective portion of cash flow hedges offset by the reclassification of
accumulated losses totaling $28 million from accumulated other comprehensive income on our Consolidated Balance Sheet to other income, net of losses in the Consolidated
Statement of Income. The reclassified amounts completely offset the effective portion related to the revaluation of the related foreign−denominated debt. The amount of hedge
ineffectiveness on cash flow hedges during the years ended December 31, 2010 and 2009 was insignificant.
(c) The amounts represent the forward points excluded from the assessment of hedge effectiveness.
(d) The amounts represent the effective portion of net investment hedges. There are offsetting losses of $237 million, gains of $187 million, and gains of $1 million for the years ended
December 31, 2011, 2010, and 2009, respectively, recognized in accumulated other comprehensive income related to the revaluation of the related net investment in foreign
operations.
25. Income Taxes
Effective June 30, 2009, we converted from a limited liability company (LLC) to a corporation (the Conversion). Prior to the Conversion, most of our
U.S. entities were pass−through entities for U.S. federal income tax purposes. U.S. federal, state, and local income taxes were generally not provided for
these entities as they were not taxable entities except in a few local jurisdictions that tax LLCs or partnerships. LLC members were required to report their
share of our taxable income on their respective income tax returns. As a result of the Conversion, we became subject to corporate U.S. federal, state, and
local taxes beginning in the third quarter of 2009.
Deferred tax assets and liabilities result from temporary differences between assets and liabilities measured for financial reporting purposes and those
measured for income tax return purposes. The Conversion resulted in a $1.2 billion increase in income tax expense related to the establishment of deferred
tax liabilities and assets of $2.5 billion and $1.3 billion, respectively. Our banking, insurance, and foreign subsidiaries generally were and continue to be
corporations that are subject to U.S. and foreign income taxes and are required to provide for these taxes. The Conversion did not change the tax status of
these subsidiaries.
The following table summarizes income (loss) from continuing operations before income tax expense.
Year ended December 31, ($ in millions) 2011 2010 2009
U.S. (loss) income $ (785) $ 594 $ (5,209)
Non−U.S. income (loss) 852 545 (1,700)
Income (loss) from continuing operations before income tax expense $ 67 $ 1,139 $ (6,909)
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