Ally Bank 2012 Annual Report Download - page 87

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Lending Commitments
Our Automotive Finance operations and Commercial Finance Group have outstanding revolving lending commitments with customers.
The amounts presented represent the unused portion of those commitments at December 31, 2012. Refer to Note 28 to the Consolidated
Financial Statements for additional information.
Lease Commitments
We have obligations under various operating lease arrangements (primarily for real property) with noncancelable lease terms that expire
after December 31, 2012. Refer to Note 28 to the Consolidated Financial Statements for additional information.
Purchase Obligations
We enter into multiple contractual arrangements for various services. The arrangements represent fixed payment obligations under our
most significant contracts and primarily relate to contracts with information technology providers. Refer to Note 28 to the Consolidated
Financial Statements for additional information.
Bank Certificates of Deposit
Refer to Note 14 to the Consolidated Financial Statements for additional information.
Critical Accounting Estimates
Accounting policies are integral to understanding our Management's Discussion and Analysis of Financial Condition and Results of
Operations. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of
America (GAAP) requires management to make certain judgments and assumptions, on the basis of information available at the time of the
financial statements, in determining accounting estimates used in the preparation of these statements. Our significant accounting policies are
described in Note 1 to the Consolidated Financial Statements; critical accounting estimates are described in this section. An accounting
estimate is considered critical if the estimate requires management to make assumptions about matters that were highly uncertain at the time
the accounting estimate was made. If actual results differ from our judgments and assumptions, then it may have an adverse impact on the
results of operations and cash flows. Our management has discussed the development, selection, and disclosure of these critical accounting
estimates with the Audit Committee of the Board, and the Audit Committee has reviewed our disclosure relating to these estimates.
Fair Value of Financial Instruments
We use fair value measurements to record fair value adjustments to certain instruments and to determine fair value disclosures. Refer to
Note 25 to the Consolidated Financial Statements for description of valuation methodologies used to measure material assets and liabilities at
fair value and details of the valuation models, key inputs to those models, and significant assumptions utilized. We follow the fair value
hierarchy set forth in Note 25 to the Consolidated Financial Statements in order to prioritize the inputs utilized to measure fair value. We
review and modify, as necessary, our fair value hierarchy classifications on a quarterly basis. As such, there may be reclassifications between
hierarchy levels.
The following table summarizes assets and liabilities measured at fair value and the amounts measured using Level 3 inputs. The table
includes recurring and nonrecurring measurements.
Year ended December 31, ($ in millions) 2012 2011
Assets at fair value $ 20,408 $ 30,172
As a percentage of total assets 11% 16%
Liabilities at fair value $ 2,468 $ 6,299
As a percentage of total liabilities 2% 4%
Assets at fair value using Level 3 inputs $ 1,288 $ 4,666
As a percentage of assets at fair value 6% 15%
Liabilities at fair value using Level 3 inputs $ 3 $ 878
As a percentage of liabilities at fair value n/m 14%
n/m = not meaningful
Level 3 assets declined 72% or $3.4 billion primarily due to the deconsolidation of ResCap during the year ended December 31, 2012,
which resulted in a significant decline in mortgage servicing rights, mortgage loans held-for-sale, net, and consumer mortgage finance
receivables and loans, net. Refer to Note 1 to the Consolidated Financial Statements for further information on the deconsolidation of ResCap.
As the value of the consumer mortgage finance receivables and loans, net, declined, the value of the related on-balance sheet securitization
debt also declined, which was the primary reason Level 3 liabilities declined by 99.9% or $875 million.
We have numerous internal controls in place to ensure the appropriateness of fair value measurements. Significant fair value measures
are subject to detailed analytics and management review and approval. We have an established model validation policy and program in place
that covers all models used to generate fair value measurements. This model validation program ensures a controlled environment is used for
the development, implementation, and use of the models and change procedures. Further, this program uses a risk-based approach to select
Table of Contents
Management's Discussion and Analysis
Ally Financial Inc. • Form 10-K