DELPHI 2012 Annual Report Download - page 90

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During the year ended December 31, 2012, Delphi received a dividend of $62 million from one of its equity method
investments. The dividend was recognized as a reduction to the investment with $25 million representing a return on
investment included in cash flows from operating activities and $37 million representing a return of capital investment and
included in cash flows from investing activities.
Use of estimates—Preparation of consolidated financial statements in conformity with U.S. GAAP requires the use of
estimates and assumptions that affect amounts reported therein. Generally, matters subject to estimation and judgment include
amounts related to accounts receivable realization, inventory obsolescence, asset impairments, useful lives of intangible and
fixed assets, deferred tax asset valuation allowances, income taxes, pension benefit plan assumptions, accruals related to
litigation, warranty costs, environmental remediation costs, worker’s compensation accruals and healthcare accruals. Due to the
inherent uncertainty involved in making estimates, actual results reported in future periods may be based upon amounts that
differ from those estimates.
Revenue recognition—Sales are recognized when there is evidence of a sales agreement, the delivery of goods has
occurred, the sales price is fixed or determinable and the collectability of revenue is reasonably assured. Sales are generally
recorded upon shipment of product to customers and transfer of title under standard commercial terms. In addition, if Delphi
enters into retroactive price adjustments with its customers, these reductions to revenue are recorded when they are determined
to be probable and estimable. From time to time, Delphi enters into pricing agreements with its customers that provide for price
reductions, some of which are conditional upon achieving certain joint cost saving targets. In these instances, revenue is
recognized based on the agreed-upon price at the time of shipment.
Sales incentives and allowances are recognized as a reduction to revenue at the time of the related sale. In addition, from
time to time, Delphi makes payments to customers in conjunction with ongoing and future business. These payments to
customers are recognized as a reduction to revenue at the time of the commitment to make these payments.
Shipping and handling fees billed to customers are included in net sales, while costs of shipping and handling are
included in cost of sales.
Delphi collects and remits taxes assessed by different governmental authorities that are both imposed on and concurrent
with a revenue-producing transaction between the Company and the Company’s customers. These taxes may include, but are
not limited to, sales, use, value-added, and some excise taxes. Delphi reports the collection of these taxes on a net basis
(excluded from revenues).
Membership interests—At the Acquisition Date, the outstanding common stock of the Predecessor was canceled and
membership interests in Delphi Automotive LLP were issued to Delphi’s owners. On March 31, 2011, all of the outstanding
Class A and Class C membership interests held by GM and the PBGC were redeemed for approximately $4.4 billion.
In conjunction with the completion of the initial public offering on November 22, 2011 of 24,078,827 ordinary shares by
the selling shareholders for an aggregate purchase price of approximately $530 million, all of the outstanding equity of Delphi
Automotive LLP was exchanged for 328,244,510 ordinary shares, par value $0.01 in Delphi Automotive PLC. As a result,
Delphi Automotive LLP became a wholly-owned subsidiary of Delphi Automotive PLC. Delphi did not receive any proceeds
from this offering.
Prior to the initial public offering, total membership interests and net income were allocated among the respective classes
based on the cumulative distribution provisions of the Fourth Amended and Restated Limited Liability Partnership Agreement
of Delphi Automotive LLP (the “Fourth LLP Agreement”). Refer to Note 15. Shareholders’ Equity and Net Income Per Share
for additional information.
Net income per share—Basic net income per share is computed by dividing net income attributable to Delphi by the
weighted–average number of ordinary shares outstanding during the period. Diluted net income per share reflects the weighted
average dilutive impact of all potentially dilutive securities from the date of issuance and is computed using the treasury stock
method by dividing net income attributable to Delphi by the diluted weighted-average number of ordinary shares outstanding.
Share amounts included in these notes are on a diluted basis. See Note 15. Shareholders’ Equity and Net Income Per Share for
additional information including the calculation of basic and diluted net income per share.
Research and development—Costs are incurred in connection with research and development programs that are
expected to contribute to future earnings. Such costs are charged against income as incurred. Total research and development
expenses (including engineering) were $1.2 billion, $1.2 billion and $1.0 billion for the years ended December 31, 2012, 2011
and 2010, respectively.
Cash and cash equivalents—Cash and cash equivalents are defined as short-term, highly liquid investments with
original maturities of three months or less.
Time deposits—From time to time, Delphi enters into various time deposit agreements whereby certain of Delphi’s
funds on deposit with financial institutions may not be withdrawn for a specified period of time. Time deposits with original