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Notes to the Financial Statements
Ford Motor Company | 2010 Annual Report 119
NOTE 15. IMPAIRMENT OF LONG-LIVED ASSETS (Continued)
Automotive Sector
North America Long-Lived Assets. Based upon the financial impact of rapidly-changing U.S. market conditions during
the second quarter of 2008, we projected a decline in net cash flows for the Ford North America segment. As a result, in
the second quarter of 2008 we tested the long-lived assets for impairment and recorded in Automotive cost of sales a pre-
tax charge of $5.3 billion, representing the amount by which the carrying value of the assets exceeded the estimated fair
value. The fair value measurement used to determine the impairment was based on the income approach, which utilized
cash flow projections consistent with the most recent Ford North America business plan approved by our Board of
Directors, a terminal value, and a discount rate equivalent to a market participant's weighted average cost of capital.
The table below describes the significant components of the second quarter 2008 long-lived asset impairment
(in millions):
Ford North
Ford North Ford North
Ford North
America
AmericaAmerica
America
Land................................................................................................................................................................
................................
$ —
Buildings and land improvements ................................................................................................................................
.............................
698
Machinery, equipment and other................................................................................................................................
...............................
2,833
Special tools ................................................................................................................................................................
.............................
1,769
Total................................................................................................................................................................
................................
$ 5,300
Financial Services Sector
Certain Vehicle Line Operating Leases. The shift in consumer preferences combined with a weak economic climate
caused a significant reduction in auction values, in particular for used full-size trucks and traditional SUVs. As a result, in
the second quarter of 2008 we tested Ford Credit's operating leases in its North America segment for impairment and
recorded a pre-tax impairment charge in Selling, administrative and other expenses on our consolidated statement of
operations and in Financial Services depreciation on our sector statement of operations of $2.1 billion, representing the
amount by which the carrying value of certain vehicle lines in Ford Credit's lease portfolio exceeded the estimated fair
value. The fair value used to determine the impairment was based on the income approach and was measured by
discounting the contractual payments and estimated auction proceeds. The discount rate reflected hypothetical market
assumptions regarding borrowing rates, credit loss patterns, and residual value risk.
NOTE 16. NET INTANGIBLE ASSETS
Our intangible assets are comprised primarily of license and advertising agreements, patents, customer contracts,
technology, and land rights and all are amortized over their determinable lives.
The components of other net intangible assets at December 31 are as follows (in millions):
2010
20102010
2010
2009
20092009
2009
Gross
GrossGross
Gross
Carrying
Carrying Carrying
Carrying
Amount
AmountAmount
Amount
Less:
Less: Less:
Less:
Accumulated
Accumulated Accumulated
Accumulated
Amortizat
AmortizatAmortizat
Amortization
ionion
ion
Net Carrying
Net Carrying Net Carrying
Net Carrying
Amount
AmountAmount
Amount
Gross
Gross Gross
Gross
Carrying
Carrying Carrying
Carrying
Amount
AmountAmount
Amount
Less:
Less: Less:
Less:
Accumulated
Accumulated Accumulated
Accumulated
Amortization
AmortizationAmortization
Amortization
Net Carrying
Net Carrying Net Carrying
Net Carrying
Amount
AmountAmount
Amount
Automotive Sector
Automotive SectorAutomotive Sector
Automotive Sector
Manufacturing and production
incentive rights ................................
................................
$ 319 $ (319) $ — $ 305 $ (228) $ 77
License and advertising
agreements ................................
................................
111 (39) 72 96 (32) 64
Other................................
................................
76 (46) 30 74 (50) 24
Total Automotive sector
................................
$ 506 $ (404) $ 102 $ 475 $ (310) $ 165