Goodwill
The following table summarizes the changes in the carrying amounts of Goodwill (dollars in millions):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| GMNA | | GME | | GMIO | | GMSA | | Total Automotive | | GM Financial | | Total |
Balance at January 1, 2012 | $ | 26,399 |
| | $ | 581 |
| | $ | 610 |
| | $ | 151 |
| | $ | 27,741 |
| | $ | 1,278 |
| | $ | 29,019 |
|
Impairment charges | (26,399 | ) | | (590 | ) | | (156 | ) | | — |
| | (27,145 | ) | | — |
| | (27,145 | ) |
Goodwill from business combinations(a) | — |
| | — |
| | 61 |
| | — |
| | 61 |
| | — |
| | 61 |
|
Effect of foreign currency and other | — |
| | 9 |
| | 34 |
| | (5 | ) | | 38 |
| | — |
| | 38 |
|
Balance at December 31, 2012 | — |
| | — |
| | 549 |
| | 146 |
| | 695 |
| | 1,278 |
| | 1,973 |
|
Impairment charges | — |
| | — |
| | (541 | ) | | — |
| | (541 | ) | | — |
| | (541 | ) |
Goodwill from business combinations(a) | — |
| | — |
| | — |
| | 10 |
| | 10 |
| | 144 |
| | 154 |
|
Effect of foreign currency and other | — |
| | — |
| | (8 | ) | | (18 | ) | | (26 | ) | | — |
| | (26 | ) |
Balance at December 31, 2013 | $ | — |
| | $ | — |
| | $ | — |
| | $ | 138 |
| | $ | 138 |
| | $ | 1,422 |
| | $ | 1,560 |
|
| | | | | | | | | | | | | |
Accumulated impairment charges at January 1, 2012 | $ | — |
| | $ | (2,482 | ) | | $ | (270 | ) | | $ | — |
| | $ | (2,752 | ) | | $ | — |
| | $ | (2,752 | ) |
Accumulated impairment charges at December 31, 2012 | $ | (26,399 | ) | | $ | (3,072 | ) | | $ | (426 | ) | | $ | — |
| | $ | (29,897 | ) | | $ | — |
| | $ | (29,897 | ) |
Accumulated impairment charges at December 31, 2013 | $ | (26,399 | ) | | $ | (3,072 | ) | | $ | (967 | ) | | $ | — |
| | $ | (30,438 | ) | | $ | — |
| | $ | (30,438 | ) |
_________
| |
(a) | Refer to Note 3 for additional information concerning the acquisitions. |
In the three months ended December 31, 2013, 2012, and 2011 we performed our annual goodwill impairment testing as of October 1 for all reporting units. In addition, in the years ended December 31, 2013, 2012 and 2011, we performed event-driven goodwill impairment tests at various dates for certain of our reporting units.
GMNA
Subsequent to our 2012 annual goodwill impairment testing, we reversed $36.2 billion of our deferred tax asset valuation allowances for our GMNA reporting unit. The reversal of the deferred tax asset valuation allowances resulted in the carrying amount of our GMNA reporting unit exceeding its fair value. As a result we performed an event-driven goodwill impairment test in the three months ended December 31, 2012 and recorded a Goodwill impairment charge of $26.4 billion. At December 31, 2012 GMNA's Goodwill balance was $0. Refer to Note 18 for additional information on the reversal of our deferred tax asset valuation allowances for our U.S. and Canadian operations.
GME
We adopted the provisions of ASU 2010-28, “When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts” (ASU 2010-28) on January 1, 2011 and performed Step 2 of the goodwill impairment testing analysis for our GME reporting unit which had a negative carrying amount resulting in the recognition of a cumulative-effect adjustment to beginning Retained earnings. GME continued to have a negative carrying amount and because it was more likely than not further goodwill impairment existed due to further deterioration in the business outlook for GME and increases in the fair value of estimated employee benefit obligations, we recorded Goodwill impairment charges of $590 million and $1.0 billion in the years ended December 31, 2012 and 2011. At December 31, 2012 GME's Goodwill balance was $0.
GMIO
Based on the results of our annual and event-driven goodwill impairment tests, we recorded total Goodwill impairment charges of $541 million, $156 million and $270 million in the years ended December 31, 2013, 2012 and 2011 within our GMIO segment. The impairment charges primarily related to our GM Korea Company (GM Korea) and Holden reporting units. We performed event-driven goodwill impairment tests for GM Korea in 2013, 2012 and 2011 as the fair value of GM Korea continued to be below its carrying amount due to ongoing economic weakness in certain markets to which GM Korea exports coupled with lower forecasted margins resulting from higher raw material costs and unfavorable foreign exchange rates. Furthermore, in the three months ended December 31, 2013 we announced our plans to cease mainstream distribution of Chevrolet brand in Western and Central Europe that resulted in the impairment of the remaining goodwill. Chevrolet sales in Europe are included in our GM Korea operations. We also recorded a Goodwill impairment charge in the three months ended December 31, 2013 associated with our GM India reporting unit resulting from lower forecasted profitability in India due to lower than expected sales performance of our current product offerings in India, higher raw material costs, unfavorable foreign exchange rates and recent deterioration in local market conditions. Refer to Note 9 for additional information on our operations in India. In the three months ended December 31, 2011 we reversed a deferred tax asset valuation allowance for our Holden reporting unit that resulted in the carrying amount of this reporting unit exceeding its fair value. At December 31, 2013 the goodwill balance was $0 for all of the reporting units in GMIO.
Impairment Charges
The impairment charges recorded as a result of the initial adoption of ASU 2010-28 and the annual and event-driven goodwill impairment tests in the years ended December 31, 2013, 2012 and 2011 represent the net decreases in implied goodwill resulting primarily from decreases in the fair value-to-U.S. GAAP differences attributable to those assets and liabilities that gave rise to goodwill upon our application of fresh-start reporting. The net decreases resulted primarily from the reversal of our deferred tax asset valuation allowances for certain reporting units thus resulting in the recorded amount for deferred taxes exceeding their fair values which under Accounting Standards Codification (ASC) 805, "Business Combinations" (ASC 805) results in less implied goodwill. The net decreases also resulted from improvements in our nonperformance risk and in our incremental borrowing rates since July 10, 2009. At certain of the testing dates the net decrease was also due to an increase in the high quality corporate bond rates utilized to measure our employee benefit obligations and a decrease in credit spreads between high quality corporate bond rates and market interest rates for companies with similar nonperformance risk. For the purpose of deriving an implied goodwill balance, deterioration in the business outlook and anticipated restructuring activities for GME and GM Korea resulted in a reduction in the fair value of certain tax attributes and an increase in estimated employee benefit obligations. The amount of implied goodwill derived from GM India decreased primarily from a reduction in the fair value of certain tax attributes.
Fair Value Measurements
When performing our goodwill impairment testing, the fair values of our reporting units were determined based on valuation techniques using the best available information, primarily discounted cash flow projections. We make significant assumptions and estimates, which utilized Level 3 measures, about the extent and timing of future cash flows, growth rates, market share and discount rates that represent unobservable inputs into our valuation methodologies. Our fair value estimates for annual and event-driven impairment tests assume the achievement of the future financial results contemplated in our forecasted cash flows and there can be no assurance that we will realize that value.
The valuation methodologies utilized to perform our goodwill impairment testing were consistent with those used in our application of fresh-start reporting on July 10, 2009 and in any subsequent annual or event-driven goodwill impairment tests and utilized Level 3 measures. Because the fair value of goodwill can be measured only as a residual amount and cannot be determined directly we calculated the implied goodwill for those reporting units failing Step 1 in the same manner that goodwill is recognized in a business combination pursuant to ASC 805.
