DELPHI 2012 Annual Report Download - page 91

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maturity periods of three months or less are included as Cash and cash equivalents in the consolidated balance sheets, while
time deposits with original maturity periods greater than three months are separately stated in the consolidated balance sheets.
There were no time deposits at December 31, 2012 and 2011.
Marketable securities—Marketable securities with maturities of three months or less are classified as cash and cash
equivalents for financial statement purposes. Available-for-sale securities are recorded in the consolidated financial statements
at market value with changes in market value included in other comprehensive income (“OCI”). Delphi had no available-for-
sale securities as of December 31, 2012 and 2011, respectively. In the event debt or equity securities experience an other-than-
temporary impairment in value, such impairment is recognized as a loss in the consolidated statement of operations. In 2012,
2011 and 2010, Delphi recognized an other-than-temporary impairment of $0 million, $6 million and $9 million, respectively.
Restricted cash—Restricted cash includes balances on deposit at financial institutions that have issued letters of credit in
favor of Delphi.
Accounts receivable—Delphi enters into agreements to sell certain of its accounts receivable, primarily in Europe. Since
the agreements allow Delphi to maintain effective control over the receivables, these various accounts receivable factoring
facilities were accounted for as short-term debt at December 31, 2012 and 2011. Collateral is not generally required related to
these trade accounts receivable.
The allowance for doubtful accounts is established based upon analysis of trade receivables for known collectability
issues and the aging of the trade receivables at the end of each period and, generally, all accounts receivable balances greater
than 90 days past due are fully reserved. As of December 31, 2012 and 2011, the accounts receivable reserve was $65 million
and $70 million, respectively and the provision for doubtful accounts was $22 million, $25 million and $45 million for the
years ended December 31, 2012, 2011 and 2010, respectively.
The Company exchanges certain amounts of accounts receivable, primarily in the Asia/Pacific region, for bank notes with
original maturities greater than three months. The collection of such bank notes are included in operating cash flows based on
the substance of the underlying transactions, which are operating in nature.
Inventories—As of December 31, 2012 and 2011, inventories are stated at the lower of cost, determined on a first-in,
first-out basis, or market, including direct material costs and direct and indirect manufacturing costs. Refer to Note 3.
Inventories for additional information. Obsolete inventory is identified based on analysis of inventory for known obsolescence
issues, and, generally, the market value of inventory on hand in excess of one year’s supply is fully-reserved.
From time to time, payments may be received from suppliers. These payments from suppliers are recognized as a
reduction of the cost of the material acquired during the period to which the payments relate. In some instances, supplier
rebates are received in conjunction with or concurrent with the negotiation of future purchase agreements and these amounts
are amortized over the prospective agreement period.
Property—Major improvements that materially extend the useful life of property are capitalized. Expenditures for
repairs and maintenance are charged to expense as incurred. Depreciation is determined based on a straight-line method over
the estimated useful lives of groups of property. Leasehold improvements under capital leases are depreciated over the period
of the lease or the life of the property, whichever is shorter, with the depreciation applied directly to the asset account.
At December 31, 2012 and 2011, the special tools balance was $362 million and $310 million, respectively, included
within property, net in the consolidated balance sheets. Special tools balances represent Delphi-owned tools, dies, jigs and other
items used in the manufacture of customer components. Special tools also include unreimbursed pre-production tooling costs
related to customer-owned tools for which the customer has provided a non-cancellable right to use the tool. Delphi-owned
special tools balances are depreciated over the expected life of the special tool or the life of the related vehicle program,
whichever is shorter. The unreimbursed costs incurred related to customer-owned special tools that are not subject to
reimbursement are capitalized and depreciated over the expected life of the special tool or the life of the related vehicle
program, whichever is shorter. Engineering, testing and other costs incurred in the design and development of production parts
are expensed as incurred, unless the costs are reimbursable, as specified in a customer contract. As of December 31, 2012 and
2011, the Delphi-owned special tools balances were $308 million and $259 million, respectively, and the customer-owned
special tools balances were $54 million and $51 million, respectively.
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 6.
Property, Net for more information.