DELPHI 2011 Annual Report Download - page 72

Table of Contents
Business Combinations. The fair values were estimated in accordance with the guidance in FASB ASC 820, Fair Value Measurements and Disclosures, and
were based on three generally accepted business valuation approaches: the income, market, and cost approaches. Generally, the income and market
approaches were used and weighted by the independent valuation specialists as appropriate.
The discounted cash flow ("DCF") method is a form of the income approach commonly used to value business interests. The DCF method was based
on Company-prepared projections which included a variety of estimates and assumptions. While we consider such estimates and assumptions reasonable, they
are inherently subject to significant business, economic and competitive uncertainties, many of which are beyond our control and, therefore, may not be
realized. Changes in these estimates and assumptions may have a significant effect on the determination of the fair value of the assets acquired and liabilities
assumed in the Acquisition. Accordingly, there can be no assurance that the estimates, assumptions, and values reflected in the valuations will be realized, and
actual results could vary materially.
Other estimates used in determining fair value include, but are not limited to, future cash flows or income related to intangibles, market rate
assumptions, actuarial assumptions for benefit plans and appropriate discount rates. Our estimates of fair value are based upon assumptions believed to be
reasonable, but that are inherently uncertain. Acquisition accounting along with the consummation of the Modified Plan and the disposition of the Predecessor
has had a material effect on the financial statements. Refer to Note 1. General to the audited consolidated financial statements included herein for additional
information.
Warranty Obligations
Estimating warranty obligations requires us to forecast the resolution of existing claims and expected future claims on products sold. We base our
estimate on historical trends of units sold and payment amounts, combined with our current understanding of the status of existing claims and discussions with
our customers. The key factors which impact our estimates are (1) the stated or implied warranty period; (2) OEM source; (3) OEM policy decisions regarding
warranty claims; and (4) OEMs seeking to hold suppliers responsible for product warranties. These estimates are re-evaluated on an ongoing basis. Actual
warranty obligations could differ from the amounts estimated requiring adjustments to existing reserves in future periods. Due to the uncertainty and potential
volatility of the factors contributing to developing these estimates, changes in our assumptions could materially affect our results of operations.
Legal and Other Contingencies
We are involved from time to time in various legal proceedings and claims, including commercial or contractual disputes, product liability claims and
environmental and other matters, that arise in the normal course of business. We routinely assess the likelihood of any adverse judgments or outcomes related
to these matters, as well as ranges of probable losses, by consulting with internal personnel involved with such matters as well as with outside legal counsel
handling such matters. We have accrued for estimated losses in accordance with U.S. GAAP for those matters where we believe that the likelihood of a loss
has occurred, is probable and the amount of the loss is reasonably estimable. The determination of the amount of such reserves is based on knowledge and
experience with regard to past and current matters and consultation with internal personnel involved with such matters and with outside legal counsel handling
such matters. The amount of such reserves may change in the future due to new developments or changes in circumstances. The inherent uncertainty related to
the outcome of these matters can result in amounts materially different from any provisions made with respect to their resolution.
Environmental Matters
Environmental remediation liabilities are recognized when a loss is probable and can be reasonably estimated. Such liabilities generally are not subject
to insurance coverage. The cost of each environmental remediation is estimated by engineering, financial, and legal specialists based on current law and
considers the
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