DELPHI 2013 Annual Report Download - page 95

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Share-Based Compensation—Our share-based compensation arrangements consist of the Delphi Automotive PLC Long
Term Incentive Plan (the “PLC LTIP”), and through December 31, 2012, the Value Creation Plan (the “VCP”), a long term
incentive plan for key employees. In 2013 and 2012, grants of restricted stock units (“RSUs”) to Delphi's executives were made
under the PLC LTIP. The RSU awards include a time-based vesting portion and a performance-based vesting portion. The
performance-based vesting portion includes performance and market conditions in addition to service conditions. The grant
date fair value of the RSUs is determined based on the closing price of the Company's ordinary shares on the date of the grant
of the award, including an estimate for forfeitures, or a contemporaneous valuation performed by an independent valuation
specialist with respect to awards with market conditions. Compensation expense is recognized based upon the grant date fair
value of the awards applied to the Company's best estimate of ultimate performance against the respective targets on a straight-
line basis over the requisite vesting period of the awards. The performance conditions require management to make
assumptions regarding the likelihood of achieving certain performance goals. Changes in these performance assumptions, as
well as differences in actual results from management's estimates, could result in estimated or actual fair values different from
previously estimated fair values.
We expensed the estimated fair value of the VCP over the requisite service vesting periods. Estimating the fair value for
the VCP required us to make assumptions regarding the nature of the payout of the award as well as changes in our share price
during the post-initial public offering period. The awards cliff vested on December 31, 2012, the end of the performance
period. See Note 21. Share-Based Compensation for further disclosures relating to the Company's share-based compensation
arrangements.
Business Combinations—We account for our business combinations in accordance with the accounting guidance in
FASB ASC 805, Business Combinations. The purchase price of an acquired business is allocated to its identifiable assets and
liabilities based on estimated fair values. The excess of the purchase price over the amount allocated to the assets and liabilities,
if any, is recorded as goodwill. Determining the fair values of assets acquired and liabilities assumed requires management's
judgment, the utilization of independent appraisal firms and often involves the use of significant estimates and assumptions
with respect to the timing and amount of future cash flows, market rate assumptions, actuarial assumptions, and appropriate
discount rates, among other items.
Recently issued accounting pronouncements—In December 2011, the FASB issued ASU 2011-10, Derecognition of
In-substance Real Estate—a Scope Clarification. This guidance requires that if an entity ceases to have a controlling interest in
a subsidiary that is in substance real estate due to a default on the loan (mortgage) on that real estate, it would continue to
recognize the asset and related debt until the real estate is legally transferred to satisfy the debt. The guidance is effective for
fiscal years beginning after June 15, 2012. The adoption of this guidance did not have a significant impact on Delphi's financial
statements.
The FASB amended ASC 820, “Fair Value Measurements,” with ASU 2011-04, Fair Value Measurement (Topic 820) -
Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This update
provides converged guidance on how to measure fair value, which is largely consistent with existing U.S. GAAP. This update
also requires additional fair value measurement disclosures. The provisions of this update were effective as of January 1, 2012.
The adoption of this guidance did not have a significant impact on Delphi's financial statements.
In July 2012, the FASB issued ASU 2012-02, Testing Indefinite-lived Intangible Assets for Impairment. The revised
standard is intended to simplify impairment testing of indefinite-lived intangible assets by adding an option to qualitatively
assess the asset for impairment. The guidance is effective for interim and annual impairment tests performed for fiscal years
beginning after September 15, 2012. Delphi adopted this guidance for its testing of indefinite-lived intangible assets for
impairment effective October 1, 2012 and it did not have a significant impact on Delphi's financial statements.
In December 2011, the FASB issued ASU 2011-11, Disclosures about Offsetting Assets and Liabilities. This guidance
requires entities to disclose both gross and net information about both instruments and transactions eligible for offset in the
statement of financial position and instruments and transactions subject to an agreement similar to a master netting
arrangement. In January 2013, the FASB issued ASU 2013-01, Clarifying the Scope of Disclosures about Offsetting Assets and
Liabilities, which clarified that the scope of ASU 2011-11 applies to derivatives and securities borrowing or lending
transactions subject to an agreement similar to a master netting arrangement. The guidance is effective for annual periods
beginning on or after January 1, 2013. Delphi adopted this guidance effective March 31, 2013 and applied it retrospectively for
any period presented. Refer to Note 17. Derivatives and Hedging Activities for additional information.
In February 2013, the FASB issued ASU 2013-2, Reporting of Amounts Reclassified Out of Accumulated Other
Comprehensive Income. This guidance requires an organization to present the effects on the line items of net income of
significant amounts reclassified out of accumulated other comprehensive income, but only if the item reclassified is required
under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. The guidance is effective for
fiscal years beginning after December 15, 2012. Delphi adopted this guidance effective January 1, 2013. Refer to Note 16.