DELPHI 2013 Annual Report Download - page 94

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facility and no longer derives economic benefit from the contract. All other exit costs are expensed as incurred. Refer to Note
10. Restructuring.
Environmental liabilities—Environmental remediation liabilities are recognized when a loss is probable and can be
reasonably estimated. Such liabilities generally are not subject to insurance coverage. The cost of each environmental
remediation is estimated by engineering, financial, and legal specialists based on current law and considers the estimated cost
of investigation and remediation required and the likelihood that, where applicable, other responsible parties will be able to
fulfill their commitments. The process of estimating environmental remediation liabilities is complex and dependent primarily
on the nature and extent of historical information and physical data relating to a contaminated site, the complexity of the site,
the uncertainty as to what remediation and technology will be required, and the outcome of discussions with regulatory
agencies and, if applicable, other responsible parties at multi-party sites. In future periods, new laws or regulations, advances in
remediation technologies and additional information about the ultimate remediation methodology to be used could significantly
change estimates by Delphi. Refer to Note 13. Commitments and Contingencies for more information.
Asset retirement obligations—Asset retirement obligations are recognized in accordance with FASB ASC 410, Asset
Retirement and Environmental Obligations. Conditional retirement obligations have been identified primarily related to
asbestos abatement at certain sites. To a lesser extent, conditional retirement obligations also exist at certain sites related to the
removal of storage tanks and polychlorinated biphenyl disposal costs. Asset retirement obligations were $3 million and $3
million at December 31, 2013 and 2012, respectively.
Customer concentrations—As reflected in the table below, net sales to GM and Volkswagen Group (“VW”), Delphi's
two largest customers, totaled approximately 27%, 29% and 28% of our total net sales for the years ended December 31, 2013,
2012 and 2011, respectively.
Percentage of Total Net Sales Accounts and Other Receivables
Year Ended December 31, December 31,
2013 December 31, 20122013 2012 2011
(in millions)
GM...................................................................... 17% 18% 19% $ 377 $ 382
VW...................................................................... 10% 11% 9% 199 109
Derivative financial instruments—All derivative instruments are required to be reported on the balance sheet at fair
value unless the transactions qualify and are designated as normal purchases or sales. Changes in fair value are reported
currently through earnings unless they meet hedge accounting criteria.
Exposure to fluctuations in currency exchange rates, interest rates and certain commodity prices are managed by entering
into a variety of forward contracts and swaps with various counterparties. Such financial exposures are managed in accordance
with the policies and procedures of Delphi. Delphi did not enter into derivative transactions for speculative or trading purposes.
As part of the hedging program approval process, Delphi identifies the specific financial risk which the derivative transaction
will minimize, the appropriate hedging instrument to be used to reduce the risk and the correlation between the financial risk
and the hedging instrument. Purchase orders, sales contracts, letters of intent, capital planning forecasts and historical data are
used as the basis for determining the anticipated values of the transactions to be hedged. Delphi does not enter into derivative
transactions that do not have a high correlation with the underlying financial risk. Hedge positions, as well as the correlation
between the transaction risks and the hedging instruments, are reviewed on an ongoing basis.
Foreign exchange forward contracts are accounted for as hedges of firm or forecasted foreign currency commitments to
the extent they are designated and assessed as highly effective. All foreign exchange contracts are marked to market on a
current basis. Commodity swaps are accounted for as hedges of firm or anticipated commodity purchase contracts to the extent
they are designated and assessed as effective. All other commodity derivative contracts that are not designated as hedges are
either marked to market on a current basis or are exempted from mark to market accounting as normal purchases. At
December 31, 2013 and 2012, the exposure to movements in interest rates was not hedged with derivative instruments. Refer to
Note 17. Derivatives and Hedging Activities for additional information.
Extended disability benefits—Costs associated with extended disability benefits provided to inactive employees are
accrued throughout the duration of their active employment. Workforce demographic data and historical experience are utilized
to develop projections of time frames and related expense for postemployment benefits.
Workers’ compensation benefits—Workers’ compensation benefit accruals are actuarially determined and are subject to
the existing workers’ compensation laws that vary by location. Accruals for workers’ compensation benefits represent the
discounted future cash expenditures expected during the period between the incidents necessitating the employees to be idled
and the time when such employees return to work, are eligible for retirement or otherwise terminate their employment.