DELPHI 2011 Annual Report Download - page 99

Table of Contents
Valuation of long-lived assets—The carrying value of long-lived assets held for use including definite-lived intangible assets is periodically evaluated
when events or circumstances warrant such a review. The carrying value of a long-lived asset held for use is considered impaired when the anticipated
separately identifiable undiscounted cash flows from the asset are less than the carrying value of the asset. In that event, a loss is recognized based on the
amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows
discounted at a rate commensurate with the risk involved and Delphi's review of appraisals. Impairment losses on long-lived assets held for sale are
determined in a similar manner, except that fair values are reduced for the cost to dispose of the assets. Refer to Note 20. Discontinued Operations and Note 7.
Property, Net for more information.
Intangible assets—Intangible assets were $596 million and $665 million as of December 31, 2011 and 2010, respectively. In general, definite-lived
intangible assets are being amortized over their useful lives, normally 6-20 years. Costs to renew or extend the term of acquired intangible assets are
recognized as expense as incurred. Refer to Note 8. Intangible Assets and Goodwill for more information.
Warranty—Expected warranty costs for products sold are recognized at the time of sale of the product based on its estimate of the amount that
eventually will be required to settle such obligations. These accruals are based on factors such as past experience, production changes, industry developments
and various other considerations. These estimates are adjusted from time to time based on facts and circumstances that impact the status of existing claims.
Refer to Note 10. Warranty Obligations.
Foreign currency translation—Assets and liabilities of non-U.S. subsidiaries that use a currency other than U.S. dollars as their functional currency are
translated to U.S. dollars at end-of-period currency exchange rates. The consolidated statements of operations of non-U.S. subsidiaries are translated to U.S.
dollars at average-period currency exchange rates. The effect of translation for non-U.S. subsidiaries is generally reported in OCI. The effect of
remeasurement of assets and liabilities of non-U.S. subsidiaries that use the U.S. dollar as their functional currency is primarily included in cost of sales. Also
included in cost of sales are gains and losses arising from transactions denominated in a currency other than the functional currency of a particular entity. Net
foreign currency transaction (gains) or losses of ($3 million), $20 million, $2 million and $5 million were included in the consolidated statements of
operations for the years ended December 31, 2011 and 2010, and the periods from August 19 to December 31, 2009 and January 1 to October 6, 2009,
respectively.
Restructuring—Delphi continually evaluates alternatives to align the business with the changing needs of its customers and to lower the operating
costs. This includes the realignment of its existing manufacturing capacity, facility closures, or similar actions in the normal course of business. These actions
may result in voluntary or involuntary employee termination benefits, which are mainly pursuant to union or other contractual agreements. Voluntary
termination benefits are accrued when an employee accepts the related offer. Involuntary termination benefits are accrued upon the commitment to a
termination plan and the benefit arrangement is communicated to affected employees, or when liabilities are determined to be probable and estimable,
depending on the existence of a substantive plan for severance or termination. Contract termination costs are recorded when contracts are terminated or when
Delphi ceases to use the leased facility and no longer derives economic benefit from the contract. All other exit costs are expensed as incurred. Refer to Note
11. Restructuring. Refer to Note 3. Elements of Predecessor Transformation Plan for employee termination benefits and other exit costs related to non-core
product lines. Pursuant to the Amended MRA (as defined in Note 3. Elements of Predecessor Transformation Plan), GM reimbursed the Predecessor for
severance obligations paid by the Predecessor from January 1 to October 6, 2009 in relation to all current and former UAW-represented hourly active,
inactive, and retired employees.
Environmental liabilities—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 estimated cost of investigation and remediation required and the likelihood that, where applicable, other
responsible parties will be able to fulfill their commitments. The process of estimating
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