Ford 2007 Annual Report Download - page 66

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Notes to the Financial Statements
64 Ford Motor Company | 2007 Annual Report
NOTE 2. SUMMARY OF ACCOUNTING POLICIES (Continued)
Cash and Cash Equivalents
Cash and all highly-liquid investments with a maturity of 90 days or less at the date of purchase, including short-term
time deposits, government agency securities, 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. We review our disbursement
accounts and reclassify any aggregate negative balances to a liability account included in Payables on our balance sheet.
See Note 7 for additional information regarding cash that supports Financial Services' on-balance sheet securitizations.
Marketable, Loaned and Other Securities
We classify securities as trading, available-for-sale, or held-to-maturity. Trading and available-for-sale securities are
recorded at fair value, and held-to-maturity securities are recorded at amortized cost. The fair value of trading and
available-for-sale securities is determined by quoted market prices. The estimated fair value of securities for which there
are no quoted market prices is based on similar types of securities traded in the market. Realized gains and losses are
accounted for using the specific identification method.
Unrealized gains and losses on trading securities, as well as realized gains and losses for all securities, are recorded
in Automotive interest income and other non-operating income/(expense), net and Financial Services revenues.
Unrealized holding gains and losses for available-for-sale securities are reported, net of tax, in Accumulated other
comprehensive income/(loss).
We utilize a systematic process to evaluate whether unrealized losses related to investments in debt and equity
securities are temporary in nature. Factors considered in determining whether a loss is temporary include the length of
time and extent to which the fair value has been below cost, the financial condition and near-term prospects of the issuer,
and our ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery. If
losses are determined to be other than temporary, the investment carrying amount is considered impaired and adjusted
downward to a revised fair basis.
Expected maturities of debt securities may differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without penalty.
We loan certain securities from our portfolio to other institutions. Such securities are classified as Loaned securities.
Collateral for the loaned securities, consisting of cash or other securities, is maintained at a rate of 102% of the market
value of a loaned security. We have securities as collateral in the amount of $10 billion and $4.4 billion for 2007 and
2006, respectively. These securities have not been pledged or sold. We have cash as collateral in the amount of
$480 million and $931 million for 2007 and 2006, respectively. This cash collateral is recorded in Other assets on the
consolidated balance sheet and Other current assets on the sector balance sheet, offset by a current obligation to return
the collateral in Payables on the consolidated balance sheet and Other payables on the sector balance sheet. Income
received from loaning securities is recorded as earned in Automotive interest income and other non-operating
income/(expense), net.
Allowance for Credit Losses
The allowance for credit losses is our estimate of the probable credit losses inherent in finance receivables and
operating leases at the date of the balance sheet and is included in Finance receivables, net and Net investment in
operating leases. The allowance is based on factors such as historical trends in credit losses and recoveries (including
key metrics such as delinquencies, repossessions, and bankruptcies), the composition of our present portfolio (including
vehicle brand, term, risk evaluation, and new/used vehicles), trends in historical and projected used vehicle values and
economic conditions. Additions to the allowance for credit losses are recorded as charges to the Financial Services
provision for credit and insurance losses. Finance receivables and lease investments are charged to the allowance for
credit losses at the earlier of the time an account is deemed to be uncollectible or the account is 120 days delinquent,
taking into consideration the financial condition of the borrower or lessee, the value of the collateral, recourse to
guarantors and other factors. Recoveries on finance receivables and lease investments previously charged off as
uncollectible are credited to the allowance for credit losses.!