DELPHI 2015 Annual Report Download - page 85

Table of Contents
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Based on information provided by our actuaries and asset managers, we believe that the assumptions used are reasonable;
however, changes in these assumptions could impact our financial position, results of operations or cash flows. Refer to Note
12. Pension Benefits to the audited consolidated financial statements included herein for additional information.
Accounts Receivable Allowance
Establishing valuation allowances for doubtful accounts requires the use of estimates and judgment in regard to the risk
exposure and ultimate realization. The allowance for doubtful accounts is established based upon analysis of trade receivables
for known collectability issues, including bankruptcies, and aging of receivables at the end of each period. Changes to our
assumptions could materially affect our recorded allowance.
Valuation of Long-Lived Assets, Intangible Assets and Investments in Affiliates and Expected Useful Lives
We monitor our long-lived and definite-lived assets for impairment indicators on an ongoing basis based on projections
of anticipated future cash flows, including future profitability assessments of various manufacturing sites when events and
circumstances warrant such a review. If impairment indicators exist, we perform the required impairment analysis by
comparing the undiscounted cash flows expected to be generated from the long-lived assets to the related net book values. If
the net book value exceeds the undiscounted cash flows, an impairment loss is measured and recognized. An impairment loss is
measured as the difference between the net book value and the estimated fair value of the long-lived assets. Even if an
impairment charge is not required, a reassessment of the useful lives over which depreciation or amortization is being
recognized may be appropriate based on our assessment of the recoverability of these assets. We estimate cash flows and fair
value using internal budgets based on recent sales data, independent automotive production volume estimates and customer
commitments and review of appraisals. The key factors which impact our estimates are (1) future production estimates;
(2) customer preferences and decisions; (3) product pricing; (4) manufacturing and material cost estimates; and (5) product
life / business retention. Any differences in actual results from the estimates could result in fair values different from the
estimated fair values, which could materially impact our future results of operations and financial condition. We believe that the
projections of anticipated future cash flows and fair value assumptions are reasonable; however, changes in assumptions
underlying these estimates could affect our valuations.
Goodwill and Intangible Assets
We periodically review goodwill for impairment indicators. We review goodwill for impairment annually in the fourth
quarter or more frequently if events or changes in circumstances indicate that goodwill might be impaired. The company
performs impairment reviews at the reporting unit level. We perform a qualitative assessment (step 0) of whether it is more
likely than not that a reporting unit's fair value is less than its carrying amount. If not, no further goodwill impairment testing is
performed. If so, we perform the step 1 and step 2 tests discussed hereafter. Our qualitative assessment involves significant
estimates, assumptions, and judgments, including, but not limited to, macroeconomic conditions, industry and market
conditions, financial performance of the Company, reporting unit specific events and changes in the Company's share price.
If the fair value of the reporting unit is greater than its carrying amount (step 1), goodwill is not considered to be impaired
and the second step is not required. We estimate the fair value of our reporting units using a combination of a future discounted
cash flow valuation model and, if possible, a comparable market transaction model. Estimating fair value requires the Company
to make judgments about appropriate discount rates, growth rates, relevant comparable company earnings multiples and the
amount and timing of expected future cash flows. If the fair value of the reporting unit is less than its carrying amount, an entity
must perform the second step to measure the amount of the impairment loss, if any. The second step requires a reporting unit to
compare its implied fair value of goodwill to its carrying amount. If the carrying amount of goodwill exceeds its implied fair
value, the reporting unit would recognize an impairment loss for that excess. We estimate implied fair value of goodwill in the
same way as goodwill is recognized in a business combination. We estimate fair value of the reporting unit’s identifiable net
assets excluding goodwill is compared to the fair value of the reporting unit as if the reporting unit had been acquired in a
business combination and the fair value of the reporting unit was the purchase price paid. If the carrying amount of the
reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal
to that excess.
We review indefinite-lived intangible assets annually or more frequently if events or changes in circumstances indicate
the assets might be impaired. The company does not perform a qualitative assessment (step 0) for indefinite-lived intangible
assets, but performs a quantitative review based upon forecasted cash flows similar to goodwill, as described above, on at least
an annual basis. Other intangible assets with definite lives are amortized over their useful lives and are subject to impairment
testing only if events or circumstances indicate that the asset might be impaired, as described above.