DELPHI 2015 Annual Report Download - page 101

Table of Contents
79
Discontinued operations—The Company reports financial results for discontinued operations separately from
continuing operations to distinguish the financial impact of disposal transactions from ongoing operations. Discontinued
operations reporting occurs only when the disposal of a component or a group of components of the Company represents a
strategic shift that will have a major effect on the Company's operations and financial results. During the year ended
December 31, 2015, Delphi completed the divestitures of the Company's wholly owned Thermal Systems business and the
Company's interest in its KDAC joint venture. The Company has also entered into a separate agreement for the sale of its
interest in its Shanghai Delphi Automotive Air Conditioning ("SDAAC") joint venture, which is expected to close in the first
half of 2016, subject to customary regulatory and other approvals. Delphi's interests in these joint ventures were previously
reported within the Thermal Systems segment. Accordingly, the assets and liabilities, operating results and operating and
investing cash flows for the previously reported Thermal Systems segment are presented as discontinued operations separate
from the Company’s continuing operations for all periods presented. Prior period information has been reclassified to present
this business as discontinued operations for all periods presented, and has therefore been excluded from both continuing
operations and segment results for all periods presented in these consolidated financial statements and the notes to the
consolidated financial statements, unless otherwise noted. These items had no impact on the amounts of previously reported net
income attributable to Delphi or total shareholders' equity. Refer to Note 25. Discontinued Operations for further information
regarding the Company's discontinued operations.
Warranty and product recalls—Expected warranty costs for products sold are recognized at the time of sale of the
product based on an estimate of the amount that eventually will be required to settle such obligations. These accruals are based
on factors such as past experience, production changes, industry developments and various other considerations. Costs of
product recalls, which may include the cost of the product being replaced as well as the customer’s cost of the recall, including
labor to remove and replace the recalled part, are accrued as part of our warranty accrual at the time an obligation becomes
probable and can be reasonably estimated. These estimates are adjusted from time to time based on facts and circumstances that
impact the status of existing claims. Refer to Note 9. Warranty Obligations for additional information.
Income taxes—Deferred tax assets and liabilities reflect temporary differences between the amount of assets and
liabilities for financial and tax reporting purposes. Such amounts are adjusted, as appropriate, to reflect changes in tax rates
expected to be in effect when the temporary differences reverse. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in earnings in the period that includes the enactment date. A valuation allowance is recorded to reduce
our deferred tax assets to the amount that is more likely than not to be realized. In the event we determine it is more likely than
not that the deferred tax assets will not be realized in the future, the valuation allowance adjustment to the deferred tax assets
will be charged to earnings in the period in which we make such a determination. In determining the provision for income taxes
for financial statement purposes, the Company makes certain estimates and judgments which affect its evaluation of the
carrying value of its deferred tax assets, as well as its calculation of certain tax liabilities. Refer to Note. 14. Income Taxes for
additional information.
Foreign currency translation—Assets and liabilities of non-U.S. subsidiaries that use a currency other than U.S. dollars
as their functional currency are translated to U.S. dollars at end-of-period currency exchange rates. The consolidated statements
of operations of non-U.S. subsidiaries are translated to U.S. dollars at average-period currency exchange rates. The effect of
translation for non-U.S. subsidiaries is generally reported in OCI. The effect of remeasurement of assets and liabilities of non-
U.S. subsidiaries that use the U.S. dollar as their functional currency is primarily included in cost of sales. Also included in cost
of sales are gains and losses arising from transactions denominated in a currency other than the functional currency of a
particular entity. Net foreign currency transaction gains of $8 million were included in the consolidated statement of operations
for the year ended December 31, 2015, and net foreign currency transaction losses of $5 million and $15 million were included
in the consolidated statements of operations for the years ended December 31, 2014 and December 31, 2013, respectively.
Restructuring—Delphi continually evaluates alternatives to align the business with the changing needs of its customers
and to lower operating costs. This includes the realignment of its existing manufacturing capacity, facility closures, or similar
actions, either in the normal course of business or pursuant to significant restructuring programs. These actions may result in
employees receiving voluntary or involuntary employee termination benefits, which are mainly pursuant to union or other
contractual agreements. Voluntary termination benefits are accrued when an employee accepts the related offer. Involuntary
termination benefits are accrued upon the commitment to a termination plan and the benefit arrangement is communicated to
affected employees, or when liabilities are determined to be probable and estimable, depending on the existence of a
substantive plan for severance or termination. Contract termination costs are recorded when contracts are terminated or when
Delphi ceases to use the leased facility and no longer derives economic benefit from the contract. All other exit costs are
expensed as incurred. Refer to Note 10. Restructuring for additional information.
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