DELPHI 2014 Annual Report Download - page 96

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Asset retirement obligations—Asset retirement obligations are recognized in accordance with FASB ASC 410, Asset
Retirement and Environmental Obligations. Conditional retirement obligations have been identified primarily related to
asbestos abatement at certain sites. To a lesser extent, conditional retirement obligations also exist at certain sites related to the
removal of storage tanks and polychlorinated biphenyl disposal costs. Asset retirement obligations were $3 million and $3
million at December 31, 2014 and 2013, respectively.
Customer concentrations—As reflected in the table below, net sales to GM and VW, Delphi's two largest customers,
totaled approximately 27%, 27% and 29% of our total net sales for the years ended December 31, 2014, 2013 and 2012,
respectively.
Percentage of Total Net Sales Accounts and Other Receivables
Year Ended December 31, December 31,
2014 December 31, 20132014 2013 2012
(in millions)
GM ................................................................... 17% 17% 18% $ 358 $ 377
VW ................................................................... 10% 10% 11% 203 199
Derivative financial instruments—All derivative instruments are required to be reported on the balance sheet at fair
value unless the transactions qualify and are designated as normal purchases or sales. Changes in fair value are reported
currently through earnings unless they meet hedge accounting criteria.
Exposure to fluctuations in currency exchange rates, interest rates and certain commodity prices are managed by entering
into a variety of forward contracts and swaps with various counterparties. Such financial exposures are managed in accordance
with the policies and procedures of Delphi. Delphi does not enter into derivative transactions for speculative or trading
purposes. As part of the hedging program approval process, Delphi identifies the specific financial risk which the derivative
transaction will minimize, the appropriate hedging instrument to be used to reduce the risk and the correlation between the
financial risk and the hedging instrument. Purchase orders, sales contracts, letters of intent, capital planning forecasts and
historical data are used as the basis for determining the anticipated values of the transactions to be hedged. Delphi does not
enter into derivative transactions that do not have a high correlation with the underlying financial risk. Hedge positions, as well
as the correlation between the transaction risks and the hedging instruments, are reviewed on an ongoing basis.
Foreign exchange forward contracts are accounted for as hedges of firm or forecasted foreign currency commitments to
the extent they are designated and assessed as highly effective. All foreign exchange contracts are marked to market on a
current basis. Commodity swaps are accounted for as hedges of firm or anticipated commodity purchase contracts to the extent
they are designated and assessed as effective. All other commodity derivative contracts that are not designated as hedges are
either marked to market on a current basis or are exempted from mark to market accounting as normal purchases. At
December 31, 2014 and 2013, the exposure to movements in interest rates was not hedged with derivative instruments. Refer to
Note 17. Derivatives and Hedging Activities for additional information.
Extended disability benefits—Costs associated with extended disability benefits provided to inactive employees are
accrued throughout the duration of their active employment. Workforce demographic data and historical experience are utilized
to develop projections of time frames and related expense for postemployment benefits.
Workers’ compensation benefits—Workers’ compensation benefit accruals are actuarially determined and are subject to
the existing workers’ compensation laws that vary by location. Accruals for workers’ compensation benefits represent the
discounted future cash expenditures expected during the period between the incidents necessitating the employees to be idled
and the time when such employees return to work, are eligible for retirement or otherwise terminate their employment.
Share-based compensation—Our share-based compensation arrangements consist of the Delphi Automotive PLC Long
Term Incentive Plan (the “PLC LTIP”), and through December 31, 2012, the Value Creation Plan (the “VCP”), a long term
incentive plan for key employees. In 2014, 2013 and 2012, grants of restricted stock units (“RSUs”) to Delphi's executives
were made under the PLC LTIP. The RSU awards include a time-based vesting portion and a performance-based vesting
portion. The performance-based vesting portion includes performance and market conditions in addition to service conditions.
The grant date fair value of the RSUs is determined based on the closing price of the Company's ordinary shares on the date of
the grant of the award, including an estimate for forfeitures, or a contemporaneous valuation performed by an independent
valuation specialist with respect to awards with market conditions. Compensation expense is recognized based upon the grant
date fair value of the awards applied to the Company's best estimate of ultimate performance against the respective targets on a
straight-line basis over the requisite vesting period of the awards. The performance conditions require management to make
assumptions regarding the likelihood of achieving certain performance goals. Changes in these performance assumptions, as
well as differences in actual results from management's estimates, could result in estimated or actual fair values different from
previously estimated fair values.