Ford 2006 Annual Report Download - page 57

55
Notes to the Financial Statements
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55
NOTE 1. PRINCIPLES OF PRESENTATION AND CONSOLIDATION
Principles of Presentation and Consolidation
Our financial statements are presented in accordance with generally accepted accounting principles in the United States
("GAAP") and are shown on two bases: 1) consolidated basis and 2) sector basis for Automotive and Financial Services.
We believe the additional information provided in the sector basis statements enables the reader to better understand the
operating performance, financial position, cash flows, and liquidity of our two very different businesses. The primary
difference between the presentation of our sector balance sheet and our consolidated balance sheet is the netting of
deferred tax assets and liabilities.
Our financial statements include consolidated majority-owned subsidiaries and consolidated variable interest entities
("VIEs") of which we are the primary beneficiary. Affiliates that we do not consolidate, but over whose operating and
financial policies we have significant influence, are accounted for using the equity method.
Certain Transactions Between Automotive and Financial Services Sectors
Intersector transactions occur in the ordinary course of business. We formally documented certain long-standing
business practices with Ford Motor Credit Company ("Ford Credit"), our indirect wholly-owned subsidiary, in a 2001
agreement that was amended in 2006. Additional details on certain transactions and the effect on each sector's balance
sheet at December 31 are shown below (in billions):
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Additionally, amounts recorded as revenue by the Financial Services sector and billed to the Automotive sector for
interest supplements and other support costs for special financing and leasing programs were $3.5 billion in 2006,
$3.3 billion in 2005, and $3.4 billion in 2004. At December 31, 2006, the Automotive sector has accrued in Accrued
liabilities and deferred revenue $4.6 billion for interest supplements and about $900 million for residual-value supplements
in the United States and Canada to be paid to Ford Credit over the term of the related finance contracts.
NOTE 2. SUMMARY OF ACCOUNTING POLICIES
Cash and Cash Equivalents
Cash and all highly liquid investments with a maturity of three months or less at the date of purchase, including short-
term time deposits and government agency and corporate obligations, are classified in Cash and cash equivalents. Cash
and cash equivalents and investments that are restricted as to withdrawal or usage under the terms of certain contractual
arrangements are recorded in Other assets on our consolidated balance sheet. See Note 7 for additional information
regarding cash that supports Financial Services' on-balance sheet securitizations.