Ally Bank 2012 Annual Report Download - page 185

183
Nonrecurring fair value measurements
Lower-of-
cost
or
fair value
or valuation
reserve
allowance
Total loss
included in
earnings for
the year
endedDecember 31, 2011 ($ in millions) Level 1 Level 2 Level 3 Total
Assets
Mortgage loans held-for-sale (a) $ — $ — $ 479 $ 479 $ (60) n/m (b)
Commercial finance receivables and loans, net (c)
Automotive — — 310 310 (30) n/m (b)
Mortgage — 1 14 15 (10) n/m (b)
Other — — 20 20 (10) n/m (b)
Total commercial finance receivables and loans, net — 1 344 345 (50) n/m (b)
Other assets
Property and equipment — 13 — 13 n/m (d) $ (8)
Repossessed and foreclosed assets (e) — 32 27 59 (15) n/m (b)
Total assets $ — $ 46 $ 850 $ 896 $ (125) $ (8)
n/m = not meaningful
(a) Represents loans held-for-sale that are required to be measured at the lower-of-cost or fair value. The table above includes only loans with fair values
below cost during 2011. The related valuation allowance represents the cumulative adjustment to fair value of those specific assets.
(b) We consider the applicable valuation or loan loss allowance to be the most relevant indicator of the impact on earnings caused by the fair value
measurement. Accordingly, the table above excludes total gains and losses included in earnings for these items. The carrying values are inclusive of the
respective valuation or loan loss allowance.
(c) Represents the portion of the portfolio specifically impaired during 2011. The related valuation allowance represents the cumulative adjustment to fair
value of those specific receivables.
(d) The total gain (loss) included in earnings is the most relevant indicator of the impact on earnings.
(e) The allowance provided for repossessed and foreclosed assets represents any cumulative valuation adjustment recognized to adjust the assets to fair value.
The following table presents quantitative information regarding the significant unobservable inputs used in significant Level 3 assets
measured at fair value on a nonrecurring basis.
December 31, 2012 ($ in millions)
Level 3
nonrecurring
measurements Valuation technique Unobservable input Range
Assets
Commercial finance receivables and loans, net
Automotive $ 108 Fair value of
collateral Adjusted appraisal value 65.0-95.0%
Fair Value Option for Financial Assets and Financial Liabilities
A description of the financial assets and liabilities elected to be measured at fair value is as follows. Our intent in electing fair value for
all these items was to mitigate a divergence between accounting losses and economic exposure for certain assets and liabilities.
• On-balance sheet mortgage securitizations — We elected to measure at fair value certain domestic consumer mortgage finance
receivables and loans and the related debt held in on-balance sheet mortgage securitization structures. The fair value-elected loans
were classified as finance receivable and loans, net, on the Consolidated Balance Sheet. Our policy is to separately record interest
income on the fair value-elected loans (unless the loans are placed on nonaccrual status); however, the accrued interest was
excluded from the fair value presentation. We classified the fair value adjustment recorded for the loans as other income, net of
losses, in the Consolidated Statement of Income.
We continued to record the fair value-elected debt balances as long-term debt on the Consolidated Balance Sheet. Our policy is
to separately record interest expense on the fair value-elected debt, which continues to be classified as interest on long-term debt in
the Consolidated Statement of Income. We classified the fair value adjustment recorded for this fair value-elected debt as other
income, net of losses, in the Consolidated Statement of Income.
• Conforming and government-insured mortgage loans held-for-sale — We elected the fair value option for conforming and
government-insured mortgage loans held-for-sale funded after July 31, 2009. We elected the fair value option to mitigate earnings
volatility by better matching the accounting for the assets with the related hedges.
Table of Contents
Notes to Consolidated Financial Statements
Ally Financial Inc. • Form 10-K