DELPHI 2011 Annual Report Download - page 96

Table of Contents
5. Pension obligations assumed are comprised primarily of plans outside the U.S. and were recorded at fair value as of the Acquisition Date.
6. Debt is comprised of foreign receivables factoring and other debt assumed from the Predecessor and the issuance of a $41 million five-year note with a
12% interest rate in conjunction with the Acquisition. Debt was recorded at fair value as of the Acquisition Date, which resulted in a $2 million net
reduction to the nominal value of the debt. The difference between the fair value and nominal value of debt will be accreted to nominal value over the
term of the indebtedness.
7. Contingent liability of up to $300 million required to be paid to the holders of allowed general unsecured claims against the Predecessor if cumulative
distributions to the members exceed $7.2 billion was not probable as of October 6, 2009 and therefore, recorded at zero.
2. SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies outlined below are applicable to both Delphi and the Predecessor, unless otherwise specifically indicated.
Accordingly, except where otherwise indicated, references to "Delphi" within Note 2. Significant Accounting Policies should be understood to be related both
to Delphi and the Predecessor.
Consolidation—The consolidated financial statements include the accounts of Delphi and domestic and non-U.S. subsidiaries in which Delphi holds a
controlling financial or management interest and variable interest entities of which Delphi has determined that it is the primary beneficiary. Delphi's share of
the earnings or losses of non-controlled affiliates, over which Delphi exercises significant influence (generally a 20% to 50% ownership interest), is included
in the consolidated operating results using the equity method of accounting. All significant intercompany transactions and balances between consolidated
Delphi businesses have been eliminated.
Use of estimates—Preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of
America ("U.S. GAAP") requires the use of estimates and assumptions that affect amounts reported therein. Generally, matters subject to estimation and
judgment include amounts related to accounts receivable realization, inventory obsolescence, asset impairments, useful lives of intangible and fixed assets,
deferred tax asset valuation allowances, income taxes, pension benefit plan assumptions, accruals related to litigation, warranty costs, environmental
remediation costs, worker's compensation accruals and healthcare accruals. Due to the inherent uncertainty involved in making estimates, actual results
reported in future periods may be based upon amounts that differ from those estimates.
Revenue recognition—Sales are recognized when there is evidence of a sales agreement, the delivery of goods has occurred, the sales price is fixed or
determinable and the collectability of revenue is reasonably assured. Sales are generally recorded upon shipment of product to customers and transfer of title
under standard commercial terms. In addition, if Delphi enters into retroactive price adjustments with its customers, these reductions to revenue are recorded
when they are determined to be probable and estimable. From time to time, Delphi enters into pricing agreements with its customers that provide for price
reductions, some of which are conditional upon achieving certain joint cost saving targets. In these instances, revenue is recognized based on the agreed-upon
price at the time of shipment.
Sales incentives and allowances are recognized as a reduction to revenue at the time of the related sale. In addition, from time to time, Delphi makes
payments to customers in conjunction with ongoing and in limited circumstances future business. These payments to customers are recognized as a reduction
to revenue at the time of the commitment to make these payments.
Shipping and handling fees billed to customers are included in net sales, while costs of shipping and handling are included in cost of sales.
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