Ford 2014 Annual Report Download - page 97

Item 7A. Quantitative and Qualitative Disclosures About Market Risk (Continued)
Pre-tax cash flow sensitivity as of year-end 2014 and 2013 was as follows (in millions):
Pre-Tax Cash Flow Sensitivity (given a
one percentage point instantaneous
increase in interest rates)
Pre-Tax Cash Flow Sensitivity (given a
one percentage point instantaneous
decrease in interest rates) (a)
December 31, 2014 $ (46) $ 46
December 31, 2013 63 (63)
_____
(a) Pre-tax cash flow sensitivity given a one percentage point decrease in interest rates requires an assumption of negative interest rates in markets
where existing interest rates are below one percent.
While the sensitivity analysis presented is Ford Credit’s best estimate of the impacts of the specified assumed interest
rate scenarios, its actual results could differ from those projected. The model Ford Credit uses to conduct this analysis is
heavily dependent on assumptions. Embedded in the model are assumptions regarding the reinvestment of maturing
asset principal, refinancing of maturing debt, replacement of maturing derivatives, exercise of options embedded in debt
and derivatives, and predicted repayment of retail installment sale and lease contracts ahead of contractual maturity.
Ford Credit’s repayment projections ahead of contractual maturity are based on historical experience. If interest rates or
other factors change, Ford Credit’s actual prepayment experience could be different than projected.
Foreign Currency Risk. Ford Credit’s policy is to minimize exposure to changes in currency exchange rates. To meet
funding objectives, Ford Credit borrows in a variety of currencies, principally U.S. dollars, Canadian dollars, Euros, Pound
Sterling, and renminbi. Ford Credit faces exposure to currency exchange rates if a mismatch exists between the currency
of receivables and the currency of the debt funding those receivables. When possible, receivables are funded with debt in
the same currency, minimizing exposure to exchange rate movements. When a different currency is used, Ford Credit
may use foreign currency swaps and foreign currency forwards to convert substantially all of its foreign currency debt
obligations to the local country currency of the receivables. As a result of this policy, Ford Credit believes its market risk
exposure, relating to changes in currency exchange rates at December 31, 2014, is insignificant.
Derivative Fair Values. The net fair value of Ford Credit’s derivative financial instruments as of December 31, 2014
was an asset of $692 million, compared to an asset of $79 million as of December 31, 2013.
ITEM 8. Financial Statements and Supplementary Data.
The Report of Independent Registered Public Accounting Firm, our Financial Statements, the accompanying Notes to
the Financial Statements, and the Financial Statement Schedule that are filed as part of this Report are listed under
“Item 15. Exhibits and Financial Statement Schedules” and are set forth beginning on page FS-1 immediately following
the signature pages of this Report.
Selected quarterly financial data for 2014 and 2013 are provided in Note 26 of the Notes to the Financial Statements.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
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