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78 Ford Motor Company | 2012 Annual Report
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF ACCOUNTING POLICIES (Continued)
Bonus and Profit Sharing
We offer various types of bonus and profit sharing benefits to our employees. The timing for expense recognition
depends on the purpose of the bonus and whether the bonus is contingent on the employees' future service. Our more
common bonus payments include:
• Ratification bonuses expensed in the period a labor agreement is ratified
• Operational performance bonuses and protection payments expensed equally over the period to payment
• Profit sharing payments accrued throughout the year in which the payment is earned. Each quarter, we
evaluate and adjust the year-to-date accrual to ensure it is consistent with the bonus formula
We record bonus and profit sharing expenses in Automotive cost of sales or Selling, administrative, and other
expenses.
Selected Other Costs
Freight, engineering, and research and development costs are included in Automotive cost of sales; advertising costs
are included in Selling, administrative, and other expenses. Freight costs on goods shipped are expensed at the earlier of
revenue recognition or as incurred. Advertising costs are expensed as incurred. Engineering, research, and development
costs are expensed as incurred when performed internally or when performed by a supplier if we guarantee
reimbursement. Engineering, research, development, and advertising expenses for the years ended December 31 were
as follows (in billions):
2012 2011 2010
Engineering, research, and development $ 5.5 $ 5.3 $ 5.0
Advertising 4.0 4.1 3.9
Presentation of Sales and Sales-Related Taxes
We collect and remit taxes assessed by different governmental authorities that are both imposed on and concurrent
with a revenue-producing transaction between us and our customers. These taxes may include, but are not limited to,
sales, use, value-added, and some excise taxes. We report the collection of these taxes on a net basis (excluded from
revenues).
NOTE 3. ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED
Balance Sheet - Offsetting. In December 2011, the Financial Accounting Standards Board ("FASB") issued a new
accounting standard that requires disclosures about offsetting and related arrangements for recognized financial
instruments and derivative instruments. The new accounting standard is effective for us as of January 1, 2013.
Intangibles - Goodwill and Other. In July 2012, the FASB issued a new accounting standard that provides the option
to evaluate qualitative factors to determine whether a calculated impairment test for indefinite-lived intangible assets is
necessary. The new accounting standard is effective for us as of January 1, 2013.