Ford 2014 Annual Report Download - page 117

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1. PRESENTATION (Continued)
Venezuelan Operations. On February 13, 2013, the Venezuelan government effected a devaluation of the bolivar,
from an exchange rate of 4.3 bolivars to the U.S. dollar to an exchange rate of 6.3 bolivars to the U.S. dollar. This
resulted in a remeasurement loss of $186 million in Automotive cost of sales in the first quarter of 2013.
Based on changes to Venezuelan currency exchange rate mechanisms in the first quarter of 2014, we changed the
exchange rate we used to remeasure the financial statements of our Venezuelan subsidiaries in U.S. dollars. Since
March 31, 2014, we have used the exchange rate determined by periodic auctions for U.S. dollars conducted under
Venezuela’s Complementary System of Foreign Currency Administration (“SICAD I”). The exchange rate we used at
March 31, 2014 was 10.8 bolivars to the U.S. dollar and resulted in a remeasurement loss of $316 million in in the first
quarter of 2014 ($310 million related to our Automotive sector and $6 million related to our Financial Services sector).
Prior to December 31, 2014, we included the results of our Venezuelan operations in our consolidated financial
statements using the consolidation method of accounting. Venezuelan exchange control regulations have resulted in an
other-than-temporary lack of exchangeability between the Venezuelan bolivar and U.S. dollar, and have restricted our
Venezuelan operations’ ability to pay dividends and obligations denominated in U.S. dollars. These exchange regulations,
combined with other recent Venezuelan regulations, have constrained parts availability and are now significantly limiting
our Venezuelan operations’ ability to maintain normal production. As a result of these conditions, and in accordance with
Accounting Standards Codification (“ASC”) 810 -- Consolidation, we began reporting the results of our Venezuelan
operations using the cost method of accounting. This change, which we made effective December 31, 2014, resulted in a
fourth quarter 2014 one-time pre-tax charge of $800 million in Automotive interest income and other income/(loss), net.
Our Venezuelan operations’ cash balance of $477 million at December 31, 2014, is no longer reported in Cash and cash
equivalents. In future periods, our financial results will not include the operating results of our Venezuelan operations.
Instead, we will record cash and recognize income from our Venezuelan operations in our consolidated financial
statements to the extent we are paid for parts we sell to them or receive dividends from them.
Ford has operated in Venezuela for the last 53 years and our operations in Venezuela will continue for the
foreseeable future. We continue to work proactively with the Venezuelan official agencies to ensure they understand our
Venezuelan operations’ business needs and potential production opportunities.
Adoption of New Accounting Standards
Income Taxes - Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax
Loss, or a Tax Credit Carryforward Exists. On January 1, 2014, we adopted the new accounting standard that requires an
unrecognized tax benefit to be presented as a decrease in a deferred tax asset when a net operating loss, a similar tax
loss, or a tax credit carryforward exists and certain criteria are met. The new accounting standard is consistent with our
prior practice, and thus the adoption did not impact our financial statements.
Foreign Currency Matters - Parent’s Accounting for Cumulative Translation Adjustment. On January 1, 2014, we
adopted the new accounting standard that clarifies the applicable guidance for a parent company’s accounting for the
release of the cumulative translation adjustment into net income upon derecognition of certain subsidiaries or groups of
assets within a foreign entity or of an investment in a foreign entity. The new accounting standard is consistent with our
prior practice, and thus the adoption did not impact our financial statements.
Liabilities - Obligations Resulting from Joint and Several Liability Arrangements. On January 1, 2014, we adopted the
new accounting standard that provides guidance for the recognition, measurement, and disclosure of obligations resulting
from joint and several liability arrangements. The adoption of this accounting standard did not impact our financial
statements or financial statement disclosures.
FS-11