Ford 2012 Annual Report Download - page 157

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Ford Motor Company | 2012 Annual Report 155
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 31. COMMITMENTS AND CONTINGENCIES (Continued)
In evaluating for accrual and disclosure purposes matters filed against us, we take into consideration factors such as
our historical experience with matters of a similar nature, the specific facts and circumstances asserted, the likelihood of
our prevailing, and the severity of any potential loss. We reevaluate and update our accruals as matters progress over
time.
For the majority of matters, which generally arise out of alleged defects in our products, we establish an accrual based
on our extensive historical experience with similar matters, and we do not believe that there is a reasonably possible
outcome materially in excess of our accrual.
For the remaining matters, where our historical experience with similar matters is of more limited value (i.e., "non-
pattern matters"), we evaluate matters primarily based on the individual facts and circumstances. For non-pattern
matters, we evaluate whether there is a reasonable possibility of a material loss in excess of any accrual that can be
estimated. Our estimate of reasonably possible loss in excess of our accruals for all material matters currently reflects
non-U.S. indirect tax matters, for which we estimate this aggregate risk to be a range of up to about $2.3 billion.
As noted, the litigation process is subject to many uncertainties, and the outcome of individual litigated matters is not
predictable with assurance. Our assessments are based on our knowledge and experience, but the ultimate outcome of
any matter could require payment substantially in excess of the amount that we have accrued and/or disclosed.
Warranty
Included in warranty cost accruals are the costs for basic warranty coverages and field service actions (i.e., product
recalls and owner notification programs) on products sold. These costs are estimates based primarily on historical
warranty claim experience. Warranty accruals accounted for in Accrued liabilities and deferred revenue for the years
ended December 31 were as follows (in millions):
2012 2011
Beginning balance $ 3,915 $ 3,855
Payments made during the period (2,254)(2,799)
Changes in accrual related to warranties issued during the period 1,885 2,215
Changes in accrual related to pre-existing warranties 49 690
Foreign currency translation and other 61 (46)
Ending balance $ 3,656 $ 3,915
Excluded from the table above are costs accrued for customer satisfaction actions.
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