General Motors Acceptance Corporation of Canada, Limited
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
For the Year Ended December 31, 2004
General Motors Acceptance Corporation of Canada, Limited
INCORPORATED UNDER THE LAWS OF CANADA
3300 BLOOR STREET WEST, SUITE 2800, TORONTO, ONTARIO M8X 2X5
*****
BOARD OF DIRECTORS
PAUL D. BULL
THOMAS E. DICKERSON
Vice-President,
Global Borrowings,
General Motors Acceptance Corporation
President,
General Motors Acceptance Corporation of
Canada, Limited
WENDE M. RAPSON
GEORGE F. HOWELL
Legal Counsel and Corporate Secretary,
General Motors Acceptance Corporation of
Canada, Limited
Former Manager, Toronto Branch,
General Motors Acceptance Corporation of
Canada, Limited
ALAN P. FRANKLIN
W. JAMES WATSON
Treasurer and Comptroller,
General Motors Acceptance Corporation of
Canada, Limited
Former President,
General Motors Acceptance Corporation of
Canada, Limited
OFFICERS
THOMAS E. DICKERSON
President
ALAN P. FRANKLIN
WENDE M. RAPSON
Treasurer and Comptroller
Legal Counsel and Corporate Secretary
MANAGEMENT’S RESPONSIBILITIES FOR CONSOLIDATED
FINANCIAL STATEMENTS
The following consolidated financial statements of General Motors Acceptance Corporation of Canada, Limited were
prepared by management, which is responsible for their integrity and objectivity. The statements have been prepared
in conformity with Canadian generally accepted accounting principles and, as such, include amounts based on
judgments of management.
Management is further responsible for maintaining a system of internal accounting controls, designed to provide
reasonable assurance that the books and records reflect the transactions of the Company and that its established
policies and procedures are carefully followed, and that the Company’s assets are safeguarded. Perhaps the most
important feature of the system of control is that it is continually reviewed for its effectiveness and is augmented by
written policies and guidelines, the careful selection and training of qualified personnel and an internal audit program.
Deloitte & Touche LLP, an independent auditing firm, is engaged by the Shareholder to audit the consolidated financial
statements of General Motors Acceptance Corporation of Canada, Limited and to issue a report thereon. The audit is
conducted in accordance with Canadian generally accepted auditing standards which comprehend the consideration of
internal accounting controls and tests of transactions to the extent necessary to form an independent opinion on the
financial statements prepared by management. The Auditors’ Report appears on the following page.
The Board of Directors’ responsibilities include, but are not limited to: (1) ensuring that management fulfills its
responsibilities in the preparation of the consolidated financial statements and (2) recommending the engaging of the
auditors. Representatives of management and the internal auditors meet regularly (separately and jointly) to assess
the effectiveness of the system of internal controls. It is management’s conclusion that the system of internal
accounting controls at December 31, 2004 provides reasonable assurance that the books and records reflect the
transactions of the Company and that it complies with its established policies and procedures.
s/ Thomas E. Dickerson
Thomas E. Dickerson
Director
s/ Alan P. Franklin
Alan P. Franklin
Director
2
AUDITORS’ REPORT
To the Shareholder of General Motors Acceptance Corporation of Canada, Limited:
We have audited the consolidated balance sheets of General Motors Acceptance Corporation of Canada, Limited as at
December 31, 2004 and 2003, and the consolidated statements of income and retained earnings and of cash flows for the years
then ended. These financial statements are the responsibility of management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we
plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the
Company as at December 31, 2004 and 2003, and the results of its operations and its cash flows for the years then ended in
accordance with Canadian generally accepted accounting principles.
s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Chartered Accountants
March 16, 2005
3
Consolidated Balance Sheet
General Motors Acceptance Corporation of Canada, Limited
December 31,
December 31,
2004
2003
(in thousands)
Assets
Cash and cash equivalents
Subordinated interests in securitization trusts, net
Finance receivables and loans, net
Investment in operating leases, net
Income and other taxes receivable
Notes receivable from affiliates
Accounts receivable from affiliates
Investments
Other assets
TOTAL ASSETS
$
Liabilities
Debt payable within one year
Interest payable
Income and other taxes payable
Accrued expenses and other liabilities
Future income taxes
Debt payable after one year
Total Liabilities
Shareholder's Equity
Capital stock without par value (authorized - unlimited,
outstanding - 1,450,000 common shares)
Contributed surplus
Retained earnings
Total Shareholder's Equity
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY
2,785,666
444,452
6,385,266
7,079,305
19,618
2,552,074
25,388
797,500
759,350
$ 20,848,619
$
$
$
7,166,238
171,889
983,763
777,327
9,778,720
18,877,937
50,000
1,920,682
1,970,682
$ 20,848,619
The Notes to Consolidated Financial Statements are an integral part of these statements.
Approved by the Board:
s/ Thomas E. Dickerson
Director
s/ Alan P. Franklin
Director
4
2,366,000
406,908
8,105,023
5,746,415
2,118,528
50,981
1,084,392
521,733
$ 20,399,980
5,444,581
190,025
10,527
829,952
696,679
11,270,030
18,441,794
50,000
129,692
1,778,494
1,958,186
$ 20,399,980
Consolidated Statements of Income and Retained Earnings
General Motors Acceptance Corporation of Canada, Limited
Year Ended December 31,
2004
2003
(in thousands)
Revenue
Consumer
Commercial
Operating leases
Total financing revenue
Interest and discount
Depreciation on operating leases
Net financing revenue
Other income
Net financing revenue and other income
$
Expense
Operating expenses
Provision for credit losses
Total expenses
Income before income taxes
Income tax expense
Net income
Retained earnings, beginning of the year
Retained earnings, end of the year
296,248
198,438
1,657,218
2,151,904
(824,516)
(1,208,540)
118,848
258,990
377,838
167,358
(7,881)
159,477
218,361
76,173
142,188
1,778,494
$ 1,920,682
The Notes to Consolidated Financial Statements are an integral part of these statements.
5
$
324,957
267,342
1,361,679
1,953,978
(822,075)
(996,230)
135,673
267,867
403,540
183,066
25,938
209,004
194,536
61,108
133,428
1,645,066
$ 1,778,494
Consolidated Statement of Cash Flows
General Motors Acceptance Corporation of Canada, Limited
Year Ended December 31,
2004
2003
(in thousands)
Operating Activities
Net income
Depreciation
Provision for credit losses
Gain on sale of finance receivables - Consumer
Net change in:
Other assets
Accounts receivable from affiliates
Interest payable
Income and other taxes payable/receivable
Accrued expenses and other liabilities
Future income taxes
Cash provided by operating activities
$
Financing Activities
Net change in short-term debt
Issuance of long-term debt
Repayment of long-term debt
Repatriation of contributed surplus
Cash provided by financing activities
142,188
1,211,128
(7,881)
(33,641)
$
133,428
998,439
25,938
(33,520)
(240,205)
25,593
(18,136)
(30,145)
153,811
80,648
1,283,360
38,264
(24,543)
5,259
(64,108)
17,402
39,872
1,136,431
133,996
3,355,871
(3,259,520)
(129,692)
100,655
(569,487)
5,056,440
(3,599,160)
887,793
Investing Activities
Acquisitions of finance receivables and loans
Liquidations of finance receivables and loans
Proceeds from sales of finance receivables
Purchases of operating lease assets
Disposals of operating lease assets
Net change in:
Notes receivable from affiliates
Investments
Subordinated interests in securitization trusts
Cash used in investing activities
Increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
(18,566,493)
17,746,679
2,581,093
(3,318,942)
777,512
(20,669,310)
18,745,693
2,275,277
(2,740,397)
1,166,852
(433,546)
286,892
(37,544)
(964,349)
419,666
2,366,000
$ 2,785,666
845,233
(62,572)
(439,224)
1,585,000
781,000
$ 2,366,000
Supplemental disclosure
Cash paid for:
Interest
Taxes
$
$
$
$
840,290
53,179
The Notes to Consolidated Financial Statements are an integral part of these statements.
6
815,329
108,047
Notes to Consolidated Financial Statements
General Motors Acceptance Corporation of Canada, Limited
Note 1. Significant Accounting Policies
General Motors Acceptance Corporation of Canada, Limited (“GMACCL” or the “Company”), a wholly-owned subsidiary of
General Motors Acceptance Corporation (“GMAC”), a Delaware corporation, was incorporated in 1953 under the laws of
Canada. The Company is a financial services organization providing a diverse range of services to a national customer base.
Consolidation and basis of presentation
The consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles and
include the accounts of the Company and its wholly-owned subsidiaries GMAC Leaseco Corporation (“Leaseco”), Canadian
Securitized Auto Receivables Corporation (“CSAR”), Canadian Securitized Auto Receivables One Corporation (“CSAROC”) and
Canadian Lease Auto Receivable Corporation (“CLARC”).
Use of estimates and assumptions
The preparation of the Company’s financial statements, in accordance with Canadian generally accepted accounting principles,
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the period. During the years presented, management has made estimates and valuation assumptions primarily related,
but not limited, to the determination of the allowance for credit losses, the valuation of automotive lease residuals and the
valuation of interests in securitized assets. Due to the inherent uncertainty involved in making estimates, actual results could
differ from those estimates.
Cash equivalents
Cash equivalents are defined as short-term, highly liquid investments with maturities of 90 days or less.
Finance receivables and loans
Finance receivables and loans are reported at the principal amount outstanding, net of unearned income. Revenue is recorded
over the term of the related finance receivable or loan using the interest method. Certain loan origination costs are deferred and
amortized to consumer or commercial revenue over the life of the related finance receivable or loan using the interest method.
Nonaccrual loans
Consumer and commercial revenue recognition is suspended when finance receivables and loans are placed on nonaccrual
status. Consumer receivables are placed on nonaccrual status when contractually delinquent for 120 days. Commercial
receivables and loans are placed on nonaccrual status when contractually delinquent for 90 days. Revenue accrued but not
collected at the date finance receivables and loans are placed on nonaccrual status is reversed and subsequently recognized
only to the extent it is received in cash. Finance receivables and loans are restored to accrual status only when contractually
current and the collection of future payments is reasonably assured.
Impaired loans
Commercial loans are considered impaired when the Company is no longer reasonably assured that it will be able to collect all
amounts due according to the contractual terms of the loan agreement and the recorded investment in the loan exceeds its
estimated fair value. If the recorded investment in impaired loans exceeds the estimated fair value, a valuation allowance is
established as a component of the allowance for credit losses. The Company’s policy is to recognize interest income related to
impaired loans on a cash basis. In addition to commercial loans specifically identified for impairment, the Company has portfolios
of smaller-balance homogeneous loans that are collectively evaluated for impairment, as discussed within the allowance for
credit losses accounting policy.
Allowance for credit losses
The allowance for credit losses is management's estimate of incurred losses in the lending portfolios. Portions of the
allowance for credit losses are specified to cover the estimated losses on commercial loans specifically identified for
impairment. The unspecified portion of the allowance for credit losses covers estimated losses on the homogeneous
portfolios of finance receivables and loans collectively evaluated for impairment. Additions to the allowance for credit
losses are made by charges to the provision for credit losses. Amounts determined to be uncollectible are charged against
the allowance for credit losses. Additionally, losses arising from the sale of repossessed assets collateralizing automotive
finance receivables and loans are charged to the allowance for credit losses. Recoveries of previously charged-off
amounts are credited to the allowance for credit losses.
7
Notes to Consolidated Financial Statements
General Motors Acceptance Corporation of Canada, Limited
The Company performs periodic and systematic detailed reviews of its lending portfolios to identify inherent risks and to
assess the overall collectibility of those portfolios. The allowance relates to portfolios collectively reviewed for impairment,
generally consumer finance receivables and loans, and is based on aggregated portfolio evaluations by product type. Loss
models are utilized for these portfolios which consider a variety of factors including, but not limited to, historical loss
experience, current economic conditions, anticipated repossessions or foreclosures based on portfolio trends,
delinquencies and credit scores, and expected loss factors by receivable and loan type. Loans in the commercial portfolios
are generally reviewed on an individual loan basis and, if necessary, an allowance is established for individual loan
impairment. Loans subject to individual reviews are analyzed based on factors including, but not limited to, historical loss
experience, current economic conditions, collateral performance, and performance trends within specific geographic and
portfolio segments, and any other pertinent information, which result in the estimation of specific allowances for credit
losses. The allowance related to specifically identified impaired loans is established based on discounted expected cash
flows, observable market prices, or for loans that are solely dependent on the collateral for repayment, the fair value of the
collateral. The evaluation of these factors for both consumer and commercial finance receivables and loans involves
complex, subjective judgments.
Securitizations
The Company sells retail finance receivables and wholesale loans to a variety of securitization trusts. Subordinated interests in
the sold receivables and loans are generally retained in the form of overcollateralization and cash reserve accounts. The
Company’s retained interests are generally subordinate to investors’ interests. The receivables and loans are sold on a fully
serviced basis. On sale, a servicing liability is recognized and amortized to other income over the estimated remaining life of the
sold receivables and loans. In 2003, two bankruptcy-remote subsidiaries of GMACCL (CSAR and CSAROC) were formed to
facilitate the Company’s securitization transactions. The Company recognizes gains and losses on securitizations of retail
finance receivables and wholesale loans which qualify as sales under the Canadian Institute of Chartered Accountants ("CICA")
Accounting Guideline (“AcG”)-12 – “Transfers of Receivables” at the date of transfer.
Gains or losses on sales depend on the previous carrying amount of the finance receivables and loans involved in the transfer,
which is allocated between the finance receivables and loans sold and the retained interests based on their relative fair values at
the date of sale. Since quoted market prices are generally not available, GMACCL estimates the fair value of retained interests
by determining the present value of future expected cash flows using modeling techniques that incorporate management’s best
estimates of key variables, including credit losses, prepayment speeds, weighted average life and discount rates commensurate
with the risks involved and the interest or finance rates on variable and adjustable contracts held by the securitization trusts.
Credit loss assumptions are based upon historical experience and the characteristics of individual receivables and loans
underlying the securities. Prepayment speed estimates are based on historical prepayment rates on similar assets. Discount
rate assumptions are determined using data obtained from market participants, where available, or based on current relevant
treasury rates plus a risk adjusted spread based on analysis of historical spreads on similar types of securities. Estimates of
interest rates on variable and adjustable contracts are based on spreads over the applicable benchmark interest rate using
market-based yield curves. Gains on sales are reported in other income.
Recourse to the Company is limited to the right to future residual cash flows, a retained limited interest in the principal balance of
the sold receivables and loans and certain cash deposits provided as credit enhancements for investors. The securitization
trusts and their investors have no recourse to the Company’s other assets for failure of debtors to pay when due. Appropriate
limited recourse loss allowances are established for expected credit losses on sold retail finance receivables.
Secured financings
The Company’s operating lease securitization transaction, which was completed on June 17, 2004, has been accounted for as a
secured financing as the Company has retained substantial risks of ownership of the leased property. The sold operating leases
remain on the balance sheet with the corresponding obligation (consisting of the debt securities issued) reflected as debt. The
Company recognizes income on the operating leases and interest expense on the securities issued in the securitization. In
2004, a special purpose bankruptcy remote subsidiary of GMACCL (CLARC) was formed to facilitate the Company’s secured
financing transactions.
8
Notes to Consolidated Financial Statements
General Motors Acceptance Corporation of Canada, Limited
Investment in operating leases
Investments in operating leases are reported at cost plus deferred lease origination costs less accumulated depreciation.
Income from operating lease assets, which includes lease origination fees net of lease origination costs, is recognized as
operating lease revenue on a straight-line basis over the scheduled lease term. Depreciation of vehicles is generally
provided on a straight-line basis to an estimated residual value over a period of time consistent with the term of the
underlying operating lease agreement. The Company evaluates its depreciation policy for leased vehicles on a regular
basis.
The Company has significant investments in the residual values of assets in its operating lease portfolio. The residual
values represent an estimate of the values of the assets at the end of the lease contracts and are initially recorded based
on residual values established at contract inception by using independently published residual value guides and estimates.
Realization of the residual values is dependent on the Company's future ability to market the vehicles under then prevailing
market conditions. Over the life of the lease, GMACCL evaluates the adequacy of its estimate of the residual value and
may make adjustments to the extent the expected value of the vehicle (including support payments from General Motors
Canada Limited (“GMCL”)) at lease termination changes. In addition to estimating the residual value at lease termination,
the Company also evaluates the current value of the operating lease asset and tests for impairment to the extent
necessary, based on market considerations and portfolio characteristics. Impairment is determined to exist if the
undiscounted expected future cash flows are lower than the carrying value of the asset. When a lease vehicle is returned
to GMACCL, the Company reclassifies the asset from investment in operating leases to other assets at the lower of cost or
estimated fair value, less costs to sell.
Repossessed assets
Assets are classified as repossessed and included in other assets when physical possession of the collateral is taken.
Repossessed assets are carried at the lower of the outstanding balance at the time of repossession, or the fair value of the
asset. Losses on the periodic revaluation of repossessed assets are charged to operating expenses. Gains and losses on the
sales of repossessed assets subject to operating leases are recorded to depreciation expense. Losses arising from the sale of
repossessed assets collateralizing automotive finance receivables and loans are charged to the allowance for credit losses. Net
costs of maintaining and operating repossessed assets are expensed as incurred.
Property and equipment
Property and equipment, stated at cost net of accumulated depreciation and amortization, are reported within other assets on the
balance sheet.
Derivative instruments and hedging activities
Effective January 1, 2004, the Company adopted AcG-13 – “Hedging Relationships”, the new accounting guideline issued by the
CICA, which increases the documentation, designation and effectiveness criteria to achieve hedge accounting subsequent to the
adoption date. This standard is to be applied prospectively and retroactive application is not permitted. The guideline requires
the discontinuance of hedge accounting for hedging relationships previously established that do not meet the criteria at the date
it is first applied. AcG-13 does not change the method of accounting for derivatives in hedging relationships, but the Emerging
Issues Committee of the CICA issued EIC-128 – “Accounting for Trading, Speculative or Non-Hedging Derivative Financial
Instruments”, which was adopted concurrently with AcG-13 and requires fair value accounting for derivatives that do not qualify
for hedge accounting.
The Company is party to derivative financial instruments that it uses in the normal course of its business to reduce its exposure
to fluctuations in interest rates and foreign currency exchange rates. The Company enters into these transactions for purposes
other than trading. These financial exposures are managed in accordance with corporate policies and procedures. The objectives
of the derivative financial instruments portfolio are to manage interest rate and currency risks by offsetting a funding obligation,
adjusting fixed and floating rate funding levels, and facilitating securitization transactions. As part of the approval process,
management identifies the specific financial risk that the derivative transaction will minimize and the appropriate instrument to be
used to reduce the risk. If it is determined that a high correlation between a specific transaction risk and the instrument does not
exist, the transaction is generally not approved.
9
Notes to Consolidated Financial Statements
General Motors Acceptance Corporation of Canada, Limited
The primary classes of derivatives used by the Company are interest rate and foreign currency swaps. Those instruments
involve, to varying degrees, elements of credit risk in the event that a counterparty should default, and market risk as the
instruments are subject to interest and foreign currency exchange rate fluctuations. Credit risk is managed through the continual
monitoring and approval of financially sound counterparties. Market risk is mitigated as derivatives are generally hedges of
underlying transactions. Cash receipts or payments on these agreements occur at periodic contractually defined intervals.
Interest rate swaps
Interest rate swaps are contractual agreements with a notional amount between the Company and another party to exchange
payments representing the net difference between a fixed and floating interest rate or between different floating interest rates,
periodically over the life of the agreements without exchange of the underlying notional amounts. The Company uses swaps to
alter its fixed and floating interest rate exposures. Interest rate swaps that are designated, and effective, as hedges of underlying
debt obligations are not marked to market, but the cash payments are recorded as an adjustment to interest expense recognized
over the lives of the underlying debt agreements. Interest rate swaps are reviewed at inception and on an ongoing basis to
ensure they remain effective as hedges in managing interest rate exposure. Interest rate swaps that are not designated in an
effective hedging relationship are carried at fair value with the changes in fair value, including any payments and receipts made
or received, being recorded in Other Income.
Foreign currency swaps
Foreign currency swaps are used to economically hedge foreign exchange exposure on foreign currency denominated debt by
converting the funding currency to Canadian dollars. Foreign currency swaps are legal agreements between two parties to
purchase one currency and sell another currency, for a price specified at the contract date, with delivery and settlement at both
the effective date and maturity date of the contract. Foreign currency swap agreements are not designated as hedges for
accounting purposes. As such, they are carried at fair value on the balance sheet with the changes in fair value being recorded
as an adjustment to interest expense in the period in which they occur.
Realized and unrealized gains or losses associated with derivative financial instruments, which have been terminated,
dedesignated from a hedging relationship or cease to be effective prior to maturity, are deferred under Other Assets and Other
Liabilities on the balance sheet and recognized in income on a basis consistent with the underlying hedged item. In the event a
designated hedged item is sold, extinguished or matures prior to the termination of the related derivative financial instrument, any
realized or unrealized gain or loss on such derivative financial instrument is recognized in income.
Income taxes
The Company uses the asset and liability method of accounting for income taxes. Under this method, future income tax assets
and liabilities are measured to reflect the net tax effects of the temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes. The future income tax assets and
liabilities are computed based on the tax rates that are expected to be in effect when the underlying items of income and
expense are expected to be realized. Future income tax assets are recognized subject to management’s judgment that
realization is more likely than not.
Reclassifications
Certain amounts in prior periods have been reclassified to conform to the current period’s presentation.
Accounting and reporting developments
In June 2003, the CICA issued AcG-15 – “Consolidation of Variable Interest Entities”. AcG-15 addresses consolidation and
disclosure by business enterprises of variable interest entities, representing those entities whose total equity investment at risk is
not sufficient to permit the entity to finance its activities without additional subordinated financial support or whose equity
investors do not have the characteristics of a “controlling financial interest”. The standard explains how to identify variable
interest entities and how an enterprise assesses its interests in a variable interest entity in order to decide whether to consolidate
that entity. AcG-15 requires an enterprise to consolidate a variable interest entity when that enterprise has a variable interest, or
combination of variable interests, that will absorb a majority of the entity’s expected losses as defined in AcG-15, receive a
majority of the entity’s expected residual returns, as defined in AcG-15, or both. AcG-15 applies to annual and interim periods
beginning on or after November 1, 2004. The Company will comply with AcG-15 beginning in the first interim reporting
period in 2005.
10
Notes to Consolidated Financial Statements
General Motors Acceptance Corporation of Canada, Limited
A number of the Company’s securitization-related variable interests are held in qualifying special purpose entities and, therefore,
are exempt from this standard. The remainder of the Company’s securitization-related variable interests are held in multi-seller
securitization trusts. GMACCL has certain other interests in variable interest entities for which a preliminary primary beneficiary
analysis has been performed. Management believes that consolidation will not be required under AcG-15, however, a final
analysis must be completed. In the event consolidation is required, management does not anticipate that there will be a material
impact on the Company’s financial position, results of operations, or cash flows.
Note 2. Cash and Cash Equivalents
Cash and cash equivalents is comprised of collateralized short-term overnight call loans and high quality trust and bank
obligations totaling $2,785.7 million and $ 2,366.0 million as at December 31, 2004 and 2003, respectively.
Note 3. Finance Receivables and Loans
The composition of finance receivables and loans outstanding was as follows:
December 31,
2004
Consumer
Retail automotive
Commercial
Wholesale
Leasing and lease financing
Term loans to dealers and other
Total commercial
Total finance receivables and loans1 and 2
2003
(in thousands)
$ 4,212,688
$ 5,541,549
1,467,063
361,060
381,209
2,209,332
$ 6,422,020
1,786,411
496,739
357,034
2,640,184
$ 8,181,733
1 Net of unearned income of $392,580 and $574,423 at December 31, 2004 and 2003, respectively.
2 The aggregate amount of gross finance receivables and loans maturing in the next four years is as follows: $3,304,925 in 2005; $1,389,334 in 2006; $1,061,536
in 2007; $637,213 in 2008; $421,592 in 2009 and thereafter. Prepayments may cause actual maturities to differ from scheduled maturities.
The following table presents an analysis of the activity in the allowance for credit losses on finance receivables and loans:
December 31,
2004
2003
(in thousands)
Allowance at beginning of year
Provisions charged to income1
Charge-offs
Recoveries and other
Allowance relating to sold receivables
Allowance at end of year
$
76,710
(7,881)
(16,864)
(50)
(15,161)
$ 36,754
$
76,920
25,938
(15,591)
(1,934)
(8,623)
$ 76,710
1 During 2004, the Company reduced its allowance for credit losses by $20.3 million as a result of revised estimates in respect of incurred losses associated with
its consumer loan portfolio based on observed trends over an extended period of time with regard to underwriting quality, delinquency, repossessions, net losses
and economic factors. The $36.8 million allowance established for credit losses as at December 31, 2004, represents management’s estimate of incurred credit
losses in the finance receivable and loan portfolio based on assumptions management believes are likely to occur.
11
Notes to Consolidated Financial Statements
General Motors Acceptance Corporation of Canada, Limited
Note 4. Sale of Finance Receivables
The Company securitizes automotive financial assets as a funding source. The Company sold retail finance receivables with
contractual principal aggregating $2,688.6 million in 2004 and $2,549.7 million in 2003. The outstanding balance of sold retail
finance receivables totaled $3,304.9 million and $2,886.1 million at December 31, 2004 and 2003, respectively.
The Company has also sold wholesale loans on a revolving basis resulting in a decrease in the balance of wholesale loans
outstanding of $2,551.1 million and $2,385.0 million at December 31, 2004 and 2003, respectively. The Company is committed
to sell eligible loans arising in certain dealer accounts to a maximum of $2,597.0 million. The outstanding securitized balance
may increase or decrease from time to time within the maximum program limits to reflect fluctuations in available wholesale loan
levels.
In the aforementioned securitizations, the Company retains servicing responsibilities and subordinated interests. The Company
receives the rights to future cash flows remaining after the investors in the securitization trusts have received their contractual
payments. The investors and the securitization trusts have no recourse to the Company’s other assets for failure of debtors to
pay when due. The Company’s retained interests are subordinate to investors’ interests and their value is subject to credit and
prepayment risks on the transferred assets. The Company sells the receivables on a fully serviced basis. No further
compensation for servicing is received after the initial sale.
The Company maintains cash collateral accounts for certain retail finance receivables and all current wholesale loan
securitizations at predetermined amounts in the unlikely event that deficiencies occur in cash flows owed to the investors. The
amounts available in such cash collateral accounts are recorded in other assets and totaled $97.0 million as of December 31,
2004 and $81.7 million as of December 31, 2003.
The following table summarizes pre-tax gains on securitizations and certain cash flows received from and paid to securitization
trusts related to receivables and loans sold.
December 31, 2004
Retail
Wholesale
(in millions)
Pre-tax gains on securitizations1
Proceeds from new securitizations
Other cash flows received on retained interests
Collections reinvested in revolving
wholesale securitizations
$
33.6
$ 2,396.1
$
65.2
n/a
$
$
December 31, 2003
Retail
Wholesale
(in millions)
54.9
185.0
-
$
33.5
$ 2,275.3
$
47.2
$ 13,288.4
n/a
$
$
54.9
-
$ 8,315.9
1Due to the short-term and floating rate nature of wholesale loans, the fair value consideration received approximates cost.
Key economic assumptions used in measuring the estimated fair value of retained interests in retail finance receivables sales1
as of the dates of such sales, were as follows:
December 31,
2004
2003
Annual prepayment rate2
Weighted-average life (in years)
Expected credit losses3
Discount rate
Servicing liability
Variable returns to securitization investors
0.93% - 0.97%
1.61 – 1.77
0.40%
9.50%
1.00%
30 day Canadian BA rate
0.89%
1.58 – 1.64
0.75%
9.50%
1.00%
30 day Canadian BA rate
1The fair value of retained interests in wholesale securitizations is assumed to approximate the carrying value due to the short-term nature of wholesale
loans.
2Based on the weighted average maturity (WAM) for finance receivables.
3A reserve totaling $12.3 million and $21.4 million at December 31, 2004 and 2003, respectively, has been established for expected credit losses on sold retail
finance receivables entered into after the adoption of AcG-12 “Transfers of Receivables” on April 1, 2001.
12
Notes to Consolidated Financial Statements
General Motors Acceptance Corporation of Canada, Limited
The table below outlines the sensitivity of the current fair value of retained interests in securitizations of retail finance receivables1
completed subsequent to March 31, 2001 resulting from 10% and 20% adverse changes in the key economic assumptions used
to measure the fair value.
December 31, 2004
(in thousands)
Fair value of retained interests
$
314,818.6
Annual prepayment rate
Impact of 10% adverse change2
Impact of 20% adverse change2
0.54% – 1.20%
$
(847.9)
$
(1,767.6)
Discount rate
Impact of 10% adverse change
Impact of 20% adverse change
$
$
9.50%
(3,052.9)
(6,020.5)
Expected credit losses
Impact of 10% adverse change
Impact of 20% adverse change
$
$
0.40%
(1,812.8)
(3,625.9)
Variable returns to securitization investors (annual rate)
Impact of 10% adverse change
Impact of 20% adverse change
2.83% - 3.50%
$
(4,277.9)
$
(8,553.2)
1The fair value of retained interests in wholesale securitizations is assumed to approximate carrying value due to the short-term nature of wholesale loans.
2An
adverse change in the fair value of retained interests may result from either an increase or decrease in prepayment speeds, depending upon the
characteristics of each securitization and the related residual cash flows. Due to the composition of the Company’s sold retail finance receivables, this amount
represents the net adverse impact of a decrease in prepayment speeds.
These sensitivities are hypothetical and should be used with caution. As the figures indicate, changes in fair value based on
adverse variations in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the
change in fair value may not be linear. Also, in this table, the effect of a variation in a particular assumption on the fair value of
the retained interest is calculated without changing any other assumption. In reality, changes in one factor may result in changes
in another, which may magnify or counteract the sensitivities.
Expected static pool net credit losses include actual incurred losses plus projected net credit losses divided by the original
balance of the outstandings comprising the securitization pool. The table below displays the expected static pool net credit
losses for 2004 and 2003 based on securitizations occurring in that year. Static pool losses are not applicable to wholesale loan
securitizations due to their short-term nature.
Expected static pool net credit losses as of:
December 31, 2004
December 31, 2003
Retail finance receivables
securitized in
2004
2003
0.33%
n/a
0.33%
0.32%
13
Notes to Consolidated Financial Statements
General Motors Acceptance Corporation of Canada, Limited
The following table presents components of securitized financial assets and other assets managed, along with quantitative
information about delinquencies and net credit losses:
Retail automotive
Wholesale
Leasing and lease financing
Term loans to dealers and other
Total managed portfolio1
Securitized finance receivables and loans
Total finance receivables and loans
Total finance receivables
and loans
2004
2003
(in millions)
Amount 60 days
or more past due
2004
2003
(in millions)
Net credit losses
2004
2003
(in millions)
$ 7,517.5
4,018.2
361.1
381.2
12,278.0
5,856.0
$ 6,422.0
$ 6.2
1.0
$ 7.2
$ 20.4
$ 20.4
$8,427.6
4,171.4
496.8
357.0
13,452.8
5,271.1
$8,181.7
$ 6.2
1.8
$ 8.0
$ 18.9
(0.1)
$ 18.8
1Managed portfolio represents finance receivables and loans on the balance sheet or that have been securitized.
Note 5. Investment in Operating Leases, Net
Investment in operating leases was as follows:
December 31,
2004
2003
(in thousands)
Vehicles, at cost
Accumulated depreciation
Investment in operating leases, net
$ 9,323,052
(2,243,747)
$ 7,079,305
$ 7,267,732
(1,521,317)
$ 5,746,415
The future lease payments due from customers for vehicles on operating leases at December 31, 2004 totaled $3,660.9 million
and are due as follows: $1,710.1 million in 2005; $1,179.8 million in 2006; $609.6 million in 2007; $161.0 million in 2008; and
$0.4 million in 2009.
Note 6. Investments
In 1999, the Company acquired 100% of the outstanding shares of GMAC Commercial Finance (Holdings) Limited (“Commercial
Finance”), formerly GMAC Commercial Credit (Holdings) Limited, and 60% of the outstanding shares of Interleasing (UK) Limited
(“Interleasing”) from GMAC for fair market value consideration equal to $797.5 million and $252.2 million, respectively. In
conjunction with these acquisitions, the Company entered into an agreement with GMAC and the acquired entities under which
GMAC unilaterally nominates the board of directors of those entities and therefore ultimately determines their strategic investing,
financing and operating policies. Accordingly, the Company has not consolidated these investments and has recorded these
investments on a cost basis. In addition, the Company has an agreement with GMAC whereby GMAC unconditionally
guarantees the Company’s investment in Commercial Finance and Interleasing. Income associated with these investments will
be recorded when received.
In January 2002, GMAC injected $34.7 million into the Company which was recorded as an increase to contributed surplus.
These funds were invested in Interleasing to maintain the Company’s 60% ownership interest.
On October 13, 2004, the Company sold its shares in Interleasing to General Motors Acceptance Corporation, Continental
(“Continental”), an affiliated company. Proceeds on the sale were $286.9 million. No gain or loss was realized on the sale.
Consideration was received through the issuance of an interest bearing promissory note by Continental. The Company received
full payment on the promissory note prior to December 31, 2004.
14
Notes to Consolidated Financial Statements
General Motors Acceptance Corporation of Canada, Limited
The recorded investment in Commercial Finance at December 31, 2004 was $797.5 million.
Commercial Finance had consolidated total assets of approximately $1.9 billion at December 31, 2004 and $2.1 billion at
December 31, 2003, the majority of which represented loans receivable relating to the group’s asset-based lending activities and
goodwill arising on acquisition of subsidiaries. Consolidated total liabilities as at December 31, 2004 and December 31, 2003 are
approximately $1.2 billion and $1.5 billion, respectively, substantially all of which relates to financing provided by other GMAC
affiliated companies.
Note 7. Other Assets
Other assets consisted of:
December 31,
2004
2003
(in thousands)
Property and equipment, at cost
Accumulated depreciation
Net property and equipment
Restricted cash collections for securitization trusts
Cash reserves held for securitization trusts
Servicer advances
Accrued interest and operating lease receivables
Investment in used vehicles held for sale
Non-performing assets, net
Unamortized debt issuance costs
Derivative assets
Deferred insurance and warranty premiums on lease contracts
Prepaid pension asset
Other assets
Total other assets
$
7,981
(2,299)
5,682
80,247
179,605
7,718
27,539
45,373
8,999
22,843
237,765
119,575
23,737
267
$ 759,350
$
8,096
(2,507)
5,589
25,780
82,494
5,491
23,527
32,366
9,187
21,420
196,600
101,394
17,545
340
$ 521,733
Note 8. Lines of Credit with Banks
Established committed revolving lines of credit with banks totaled $1.25 billion at December 31, 2004 and 2003, of which $625
million will expire on June 13, 2005 and $625 million will expire on June 16, 2008.
15
Notes to Consolidated Financial Statements
General Motors Acceptance Corporation of Canada, Limited
Note 9. Debt Payable Within One Year
Weighted Average
Interest Rate
December 31, 2004
December 31,
2004
2003
(in thousands)
Short-term notes
Domestic
Foreign 1
Total principal amount
Unamortized discount
Total
2.706%
2.803%
Bank loans and overdrafts
4.250%
$
Other notes and debentures payable within one year
Domestic
5.449%
Foreign 2
2.896%
Total
Total unsecured financing
Total secured financing
Total debt payable within one year
1
2
$
2,272,692
50,550
2,323,242
(7,239)
2,316,003
$
2,131,775
58,011
2,189,786
(6,482)
2,183,304
5,483
4,187
3,466,034
1,131,609
4,597,643
6,919,129
2,939,338
317,752
3,257,090
5,444,581
247,109
-
7,166,238
$
5,444,581
Denominated in U.S. dollars
Denominated in US Dollar, Japanese Yen, New Zealand Dollar, Polish Zloty, Czech Koruna, Euro,
Danish Krone, British Pound Sterling and Norwegian Krone.
The Company has entered into foreign currency swap agreements to fully hedge its exposures related to notes and debentures
payable in foreign currencies.
All of the above debt, with the exception of secured financing, is guaranteed by GMAC. Effective July 1, 2000, all new
guaranteed debt entered into by the Company became subject to a guarantee fee. In respect of its guarantee of short-term
notes, GMAC was paid $4.2 million in 2004 and $5.0 million in 2003. This fee is excluded from the weighted average interest
rates above.
16
Notes to Consolidated Financial Statements
General Motors Acceptance Corporation of Canada, Limited
Note 10. Debt Payable After One Year
Maturity Date
Contract
Rate
December 31,
Currency
Denomination
(in millions)
2004
2003
(in thousands)
January, 2005
7.000%
USD 200
February, 2005
(1)
¥ 6,000
February, 2005
8.250%
NZD 100
February, 2005
(2)
USD 30
March, 2005
7.000%
CAD 100
March, 2005
7.750%
USD 250
April, 2005
(3)
€ 26
April, 2005
7.000%
CZK 1,000
April, 2005
12.250%
PLN 100
July, 2005
5.250%
DKK 400
October, 2005
7.500%
NZD 100
November, 2005
6.125%
DKK 400
December, 2005
6.625%
CAD 100
February, 2006
6.125%
DKK 600
March, 2006
6.250%
CAD 100
May, 2006
6.250%
CAD 100
September, 2006
6.125%
CAD 100
November, 2007
6.125%
DKK 400
February, 2008
6.000%
DKK 500
May, 2008
7.000%
CAD 10
June, 2008
4.500%
€ 50
June, 2008
4.500%
€ 25
September, 2008
(4)
€ 400
September, 2008
7.750%
NZD 100
December, 2008
5.750%
CAD 100
June, 2009
(5)
€ 50
June, 2009
(6)
€ 15
December, 2010
6.625%
GBP 200
September, 2011
7.125%
AUD 200
Notes with original maturities up to ten years with a weighted
average interest rate at December 31, 2004 of 5.78%
Total unsecured financing
$
Total secured financing
Total debt payable after one year
$
(1) Interest at a rate of 0.10% above the 3 month JPY LIBOR rate
(2) Interest at a rate of 0.21% above the 3 month US LIBOR rate
(3) Interest at a rate of 0.20% above the 3 month EURIBOR rate
(4) Interest at a rate of 1.75% above the 3 month EURIBOR rate
(5) Interest at a rate of 1.5% above the 6 month EURIBOR rate
(6) Interest at a rate of 1.5% above the 6 month EURIBOR rate
17
131,984
100,000
100,000
100,000
87,989
109,987
10,000
81,811
40,906
654,490
86,513
100,000
81,811
24,543
463,655
187,484
$
258,220
72,369
84,632
38,733
100,000
322,775
41,656
50,286
34,473
87,550
84,632
87,550
100,000
131,324
100,000
100,000
100,000
87,550
109,437
10,000
81,472
40,736
651,774
84,630
100,000
462,561
-
7,031,423
9,392,596
7,847,670
11,270,030
386,124
-
9,778,720
$
11,270,030
Notes to Consolidated Financial Statements
General Motors Acceptance Corporation of Canada, Limited
The Company has entered into foreign currency swap agreements to fully hedge its exposures related to notes and debentures
payable in foreign currencies.
All of the above debt, with the exception of secured financing, is guaranteed by GMAC. Effective July 1, 2000, all new
guaranteed debt entered into by the Company became subject to a guarantee fee. In respect of its guarantee of debt due after
one year, GMAC was paid $40.8 million in 2004 and $33.4 million in 2003.
The following table presents the maturity of long-term debt at December 31, 2004. The maturity of the debt is based on
contractual terms, assuming that no repurchases will occur.
2006
2007
2008
2009
2010
2011 and thereafter
Long-term debt
Unamortized discount
Total long-term debt
(in thousands)
$ 3,358,583
2,287,434
2,340,245
1,147,337
479,055
187,510
9,800,164
(21,444)
$ 9,778,720
Note 11. Secured Financing
On June 17, 2004, Leaseco entered into a Master Concurrent Lease Agreement ("MCLA") with Canadian Auto Retail Lease
Trust No. 1 (the “CARLT 1"). The Company acts as Administrative Agent for the CARLT 1 pursuant to the Administration
Agreement. In accordance with the MCLA, CARLT 1 will be entitled to receive the lease payments from the underlying lessees
and CARLT 1 will also have an option to acquire the underlying vehicles upon termination of the underlying lease or the
occurrence of other certain limited events. This transaction was accounted for as a secured financing. As at December 31,
2004, the net book value of operating leases was $759.9 million and the outstanding financing was $633.2 million.
The Company maintains cash collateral accounts for certain lease securitizations at predetermined amounts in the unlikely event
that deficiencies occur in cash flows owed to investors. The amounts available in such cash collateral accounts are recorded in
other assets and totaled $83.1 million as of December 31, 2004.
Note 12. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities was as follows:
December 31,
2004
2003
(in thousands)
Dealer credit account plan
Customer security deposits
Employee compensation and benefits
Derivative liabilities
Securitization trustee payable
Deferred income
Accounts payable and other liabilities
Total accrued expenses and other liabilities
$ 239,043
45,100
46,993
156,363
164,267
132,454
199,543
$ 983,763
18
$
223,753
35,794
44,135
81,914
167,324
53,607
223,425
$ 829,952
Notes to Consolidated Financial Statements
General Motors Acceptance Corporation of Canada, Limited
Note 13. Interest and Discount
Interest and discount expense includes $714.8 million in 2004 and $699.6 million in 2003, applicable to indebtedness initially
incurred for terms of more than one year.
Note 14. Other Income
Details of other income were as follows:
Year Ended December 31,
2004
2003
(in thousands)
Excess interest and other
ongoing revenue from securitizations
Gains on securitizations
Service fee revenue from GMCL
Interest income on cash and cash equivalents
Gain on non-hedging securitization derivatives, net
Other
Total other income
$
79,799
88,567
36,207
41,041
2,315
11,061
$ 258,990
$
86,672
88,387
49,159
35,502
8,147
$ 267,867
Note 15. Transactions with Affiliates
The Company enters into transactions with related parties, in the normal course of business, on the same basis as non-related
parties.
Balance Sheet
A summary of the effect of transactions with affiliated companies on GMACCL’s balance sheet was as follows:
December 31,
2004
2003
(in thousands)
Dealer receivables due from GMCL 1
$ 136,839
$ 127,018
Notes receivable from affiliates
GMCL 2
$ 1,775,789
$ 1,557,923
GMAC Commercial Finance Corporation – Canada 3
251,612
348,437
GMAC Commercial Mortgage of Canada, Limited 3
205,140
103,023
319,533
109,145
GMAC Residential Funding of Canada, Limited 3
$ 2,552,074
$ 2,118,528
Accounts receivable from affiliates
GMCL
$
39,188
$
62,393
GMAC
(13,800)
(11,412)
$
25,388
$
50,981
Repatriation of contributed surplus
$
1
129,692
-
GMACCL provides wholesale financing and term loans to dealerships whereby GMCL has an ownership interest. These amounts are
included in finance receivables and loans.
2 The Company sold to GMCL, $498.6 million in 2004, and $398.6 million in 2003, of vehicles subject to operating leases. The
Company continues to service these leases. Under a loan agreement, the Company also makes secured loans to GMCL to fund their
vehicle leasing program and GMCL may prepay all or any portion of these loans, at any time. The rate of interest is based on a spread
over the bankers’ acceptance rate or government treasury note related to the term of the loan.
3 The Company has agreements to provide funding to related Canadian corporations wholly owned by GMAC. The revolving lines of credit
and advances may be prepaid in total, or any portion thereof, at any time. Interest payable on advances is determined based on a spread
over the average monthly commercial paper portfolio rate.
19
Notes to Consolidated Financial Statements
General Motors Acceptance Corporation of Canada, Limited
Income Statement
A summary of the effect of transactions with affiliated companies on GMACCL’s income statement was as follows:
Year Ended December 31,
2004
2003
(in thousands)
Net financing revenue
Interest on notes receivable from affiliates
Guarantee fee paid to GMAC
Interest on wholesale settlements 1
Consumer lease payments 2
GMCL lease residual value support
Wholesale subvention from GMCL
Other income
Service fee revenue from GMCL 3
Off-lease vehicle administration fees charged to GMCL 4
Expenses
Payments to GMAC for technical and administrative services
Payments to GMCL for administrative services
Insurance premiums paid to Motors Insurance Corporation
$ 95,625
45,002
11,680
9,702
(2,313)
813
$ 121,727
38,441
13,107
6,669
18,270
1,849
36,207
2,906
49,159
1,992
21,433
1,342
2
19,855
1,293
98
1
The settlement terms related to the wholesale financing of certain GM products are at shipment date. To the extent that
wholesale settlements with GMCL are made prior to the expiration of transit, interest is received from GMCL.
2 GMCL sponsors lease pull-ahead programs whereby consumers are encouraged to terminate lease contracts early in
conjunction with the acquisition of a new General Motors (“GM”) vehicle. Under these programs, GMCL waives the customer’s
remaining payment obligation and reimburses GMACCL for the waived payments.
3 GMACCL administers operating lease receivables on behalf of GMCL and receives a servicing fee.
4 GMACCL charges an administration fee for the sale of off-lease vehicles owned by GMCL at auction.
Note 16. Income Taxes
The significant temporary differences giving rise to the Company’s future net income tax liability for 2004 and 2003 of $777.3
million and $696.7 million, respectively, are as follows:
December 31, 2004
Assets
Liabilities
(in thousands)
Lease transactions
Loss carryforwards and minimum tax credits
Provision for financing losses
Pension and other post retirement benefits
Securitizations
Other
Derivative mark to market
Total future income taxes
December 31, 2003
Assets
Liabilities
(in thousands)
$ 806,797
$ 26,248
21,103
7,461
$ 747,312
$
25,205
36,056
7,333
28,724
4,385
$ 59,197
20
24,338
6,377
1,003
$ 836,524
$ 74,971
$ 771,650
Notes to Consolidated Financial Statements
General Motors Acceptance Corporation of Canada, Limited
The significant components of income tax expense are as follows:
Year Ended December 31,
2004
2003
(in thousands)
Current income tax expense (recovery)
Future income tax expense (recovery) relating to temporary differences
Future income tax expense (recovery) relating to reduction in tax rate
Total income tax expense
$ (1,486)
82,159
(4,500)
$ 76,173
$ 29,861
57,247
(26,000)
$ 61,108
A reconciliation of the statutory income tax rate to the effective tax rate for the years 2004 and 2003 follows:
December 31,
2004
%
Combined federal and provincial statutory income tax rate
Large corporations tax
Change in tax rate for future income taxes
Other items
Effective tax rate
35.0
6.5
(2.1)
(4.5)
34.9
2003
%
37.2
8.2
(13.4)
(0.6)
31.4
At December 31, 2004, the Company has provincial minimum tax credits of $26.2 million for income tax purposes that expire as
follows: $0.8 million in 2006; $4.9 million in 2007; $4.2 million in 2008; $4.1 million in 2009; $2.9 million in 2010; $3.8 million in
2012; $3.6 million in 2013; and $1.9 million in 2014. For financial reporting purposes, a future tax asset of $26.2 million has been
recognized in respect of these minimum tax credits. Realization of the minimum tax credits is dependent on future taxable
income. Although realization is not assured, management believes that it is more likely than not that they will be realized.
Note 17. Fair Value of Financial Instruments
The estimated fair value of financial instruments was as follows:
Financial assets
Subordinated interests in securitization trusts
Finance receivables and loans, net
Notes receivable from affiliates
Financial liabilities
Debt
December 31, 2004
Book
Estimated
Value
Fair Value
(in thousands)
$
444,452 $
512,878
6,385,266
6,397,876
2,552,074
2,534,395
$ 16,944,958 $ 17,058,724
21
December 31, 2003
Book
Estimated
Value
Fair Value
(in thousands)
$
406,908
8,105,023
2,118,528
$ 16,714,611
$
461,511
8,121,463
2,076,886
$ 16,886,713
Notes to Consolidated Financial Statements
General Motors Acceptance Corporation of Canada, Limited
The Company has developed the fair value estimates using available market information or other appropriate valuation
methodologies. Considerable judgment is required in interpreting market data to develop estimates of fair value, so the
estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange.
The effect of using different market assumptions and/or estimation methodologies may be material to the estimated fair value
amounts. Fair value information presented herein is based on information available at December 31, 2004 and 2003. Although
management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not
been updated since those dates and, therefore, the current estimates of fair value at dates subsequent to December 31, 2004
and 2003 may differ significantly from these amounts.
The following describes the methodologies and assumptions used, by financial instrument in the above table, to determine fair
value:
Subordinated interests in securitization trusts
The fair value was estimated by discounting the underlying expected cash flows using current market rates.
Finance receivables and loans, net
The fair value was estimated by discounting the expected future cash flows using applicable spreads to approximate current
rates applicable to each category of finance receivables and loans. The carrying value of wholesale receivables and other
receivables where interest rates adjust on a short term basis with applicable market indices (generally the prime rate) are
assumed to approximate fair value.
Notes receivable from affiliates
The fair value was estimated by discounting the expected future cash flows using applicable spreads to approximate current
rates.
Debt
The fair value of debt was determined by using quoted market prices for the same or similar issues, if available, or based on
the current rates offered to the Company for debt with similar remaining maturities. Commercial paper and demand notes
have an original term of less than 365 days and, therefore, the carrying amount of these liabilities is considered to approximate
fair value. Fair value of derivative instruments are excluded from these amounts.
Interest rate swaps
The fair value of the existing interest rate swaps was estimated by discounting expected cash flows using quoted market interest
rates. The notional balances of interest rate swap instruments of $8,293.9 million and $9,597.9 million at December 31, 2004
and 2003, respectively. The unrealized gain was $156.5 million in 2004 and $265.8 million in 2003.
Foreign currency swaps
The fair value of the existing foreign currency swaps was estimated by discounting expected cash flows using quoted market
exchange rates. The notional balances of foreign currency swap instruments of $3,067.0 million and $3,256.8 million at
December 31, 2004 and 2003, respectively. The unrealized loss was $17.0 million in 2004 and $10.9 million in 2003.
Derivatives that were dedesignated from pre-existing hedging relationships on January 1, 2004, when AcG-13 was first adopted,
were recorded at fair value on the balance sheet. The cumulative unrealized gain of $17.8 million up to that date was deferred
and recorded in Other Liabilities and will be amortized into interest expense and other income over the remaining term of the
original hedging relationship. For the twelve months ended December 31, 2004, $11.2 million of the cumulative unrealized gain
has been amortized into income with $3.1 million credited against interest expense and $8.1 million recorded in other income.
Credit risk
These aforementioned swap instruments contain an element of credit risk in the event that the counterparties are unable to meet
the terms of the agreements. However, the Company minimizes the risk exposure by limiting counterparties to those major
banks and financial institutions which meet established guidelines. In the unlikely event that a counterparty fails to meet the
terms of an interest rate or foreign currency swap agreement, risk is limited to the fair value of the instrument.
22
Notes to Consolidated Financial Statements
General Motors Acceptance Corporation of Canada, Limited
Concentration of credit risk
The Company’s business is to provide financing for GM products and GM dealers. Wholesale and dealer loan financing relates
to GM dealers, with security provided by GM vehicles (for wholesale) and GM dealership property (for loans). For wholesale
financing, the Company is also provided further protection by GMCL factory repurchase programs. Retail contracts and operating
lease assets relate to the secured sale and registered lease, respectively, of GM vehicles. The majority of retail contracts and
operating lease assets are geographically diversified throughout Canada.
Note 18. Guarantees, Commitments and Contingencies
Guarantees
The Company has standard indemnification clauses in certain of its funding arrangements that would require the Company to
pay counterparties for increased costs due to certain changes in laws or regulations. Since any changes would be dictated by
legislative and regulatory actions, which by their nature are unpredictable, the Company is not able to estimate a maximum
exposure under these arrangements.
In connection with certain asset sales and securitization transactions, the Company typically delivers standard representations
and warranties to the purchaser regarding the characteristics of the underlying transferred assets. These representations and
warranties conform to specific guidelines, which are customary in securitization transactions. These clauses are intended to
ensure that the terms and conditions of the sales contracts are met upon transfer of the asset. Prior to any sale or securitization
transaction, the Company performs due diligence with respect to the assets to be included in the sale to ensure that they meet
the purchaser’s requirements, as expressed in the representations and warranties. Due to these procedures, the Company
believes that the potential for loss under these arrangements is remote. Accordingly, no liability is reflected in the Consolidated
Balance Sheet related to these potential obligations. The maximum potential amount of future payments the Company could be
required to make would be equal to the current balances of all assets subject to such securitization or sale activities. The
Company does not monitor the total value of assets historically transferred to securitization vehicles or through other asset sales.
Therefore, the Company is unable to develop an estimate of the maximum payout under these representations and warranties.
Commitments
Future minimum rental payments required under operating leases, primarily for real property, with noncancelable lease
terms that expire after December 31, 2004, were as follows:
2005
2006
2007
2008
2009
Total minimum payment required
(in thousands)
$ 4,597
3,011
1,682
1,409
310
$ 11,009
Contingencies
The Company is subject to potential liability under laws and government regulations and various claims and legal actions that are
pending or may be asserted against it. The aggregate ultimate liability of the Company under these laws, government regulations,
claims and actions was not determinable at December 31, 2004. After consultation with counsel, it is the opinion of management that
such liability is not expected to have a material adverse effect on the Company’s consolidated financial condition, results of
operations or cash flows.
Note 19. Employee Benefit Plans
Pension
The Company participates with certain affiliated companies in Canada in a defined benefit pension plan that covers substantially
all of its employees. Benefits under the plan are generally related to an employee’s length of service, salaries and, where
applicable, contributions. An actuarial valuation is performed each year to determine the present value of the accrued pension
benefits based on projections of employees’ compensation levels to time of retirement.
23
Notes to Consolidated Financial Statements
General Motors Acceptance Corporation of Canada, Limited
The measurement dates for the 2004 and 2003 year-end valuations were November 30, 2004 and November 30, 2003,
respectively. Funding decisions in respect of plan assets occur annually based on the previous year valuations.
As of the above valuation dates, the percentage of the fair value of total plan assets represented by each major category of plan
assets were as follows:
Asset Category (%)
Equity Securities
Debt Securities
Real Estate
Total
2004
61
33
6
100
2003
61
32
7
100
Other post-retirement benefits
The Company participates in various post-retirement medical, dental, vision and life insurance plans. The Company accrues
post-retirement benefit costs over the active service period of employees to the date of full eligibility for such benefits.
24
Notes to Consolidated Financial Statements
General Motors Acceptance Corporation of Canada, Limited
Pension Plan
December 31,
2004
2003
(in thousands)
$ 115,449
$ 109,968
2,506
2,406
7,520
7,424
118
111
13,891
3,376
(7,661)
(7,836)
131,823
115,449
Change in benefit obligations
Benefit obligation at beginning of year
Service cost
Interest cost
Plan participants’ contributions
Actuarial loss
Benefits paid
Plan amendments and other
Benefit obligation at end of year
Change in plan assets
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer's contributions
Plan participants’ contributions
Benefits paid
Fair value of plan assets at end of year
Funded status
Unrecognized actuarial loss
Past service cost
Net amount recognized
87,147
9,834
10,542
118
(7,476)
100,165
81,793
8,462
4,429
111
(7,648)
87,147
(31,658)
48,641
6,754
$ 23,737
(28,302)
38,039
7,808
$ 17,545
Other Post-retirement
Benefits
December 31,
2004
2003
(in thousands)
$ 60,324
$ 49,972
1,883
1,565
3,739
3,518
1,480
873
(927)
(1,002)
(3,025)
5,398
63,474
60,324
(63,474)
20,930
127
$ (42,417)
December 31,
2004
2003
(in thousands)
Components of expense
Service cost
Interest cost
Expected return on plan assets
Amortization of past service cost
Recognized net actuarial loss
Amortization of transitional obligation
Other
Net expense
$
$
Weighted-average assumptions
Discount rate
Expected rate of return on plan assets
Rate of compensation increase
2,506
7,520
(8,274)
1,114
1,729
(245)
4,350
6.00%
8.75%
4.00%
25
$
$
2,406
7,424
(7,592)
1,264
1,566
10
5,078
6.75%
8.75%
4.00%
(60,324)
20,027
1,089
$ (39,208)
December 31,
2004
2003
(in thousands)
$
$
1,883
3,739
127
1,480
7,229
6.00%
4.00%
$
$
1,565
3,518
98
873
6,054
6.75%
4.00%
Notes to Consolidated Financial Statements
General Motors Acceptance Corporation of Canada, Limited
Note 20. Subsequent Event
Securitization
On January 17, 2005, the Company sold a pool of retail finance receivables to Canadian Capital Auto Receivables Asset Trust.
The contractual principal balance totaled $477.7 million and the proceeds received was approximately $413.4 million.
Secured Financing
On January 19, 2005, Leaseco entered into a Master Concurrent Lease Agreement (“MCLA”) with Canadian Auto Retail Lease
Trust No. 2. The original net book value of the lease assets, which were subject to the MCLA, was approximately $766.4 million
and the financing received was approximately $744.1 million.
Credit Ratings
Substantially all of GMAC and the Company’s debt has been rated by nationally recognized statistical rating organizations. As of
March 16, 2005, all of GMAC’s and the Company’s ratings were within the investment grade category. Concerns over the
competitive and financial strength of GM, including how it will fund its health care liabilities, resulted in GMAC and the
Company experiencing a series of negative rating actions since 2001, with GMAC’s and the Company’s current credit
ratings representing the lowest levels in history. In the fourth quarter of 2004, all of the nationally recognized rating
agencies downgraded GMAC’s and the Company's credit ratings. On February 14, 2005, one rating agency (Moody’s
Investors Service, Inc.) revised the outlook of GMAC and the Company from stable to negative. On March 16, 2005, the
rating agencies lowered the credit rating and/or outlook of GMAC and the Company as summarized in the table below.
Rating Agency
Commercial Paper Outlook
Dominion Bond Rating Service Limited
R-1 (low)
Negative BBB (high)
Negative
March 16, 2005
Fitch, Inc.
F-3
Negative BBB-
Negative
March 16, 2005
Moody’s Investors Service, Inc.
Prime-2
Negative Baa1
Credit Watch (Negative)
March 16, 2005
Standard & Poor’s Ratings Services
A-3
Negative BBB-
Negative
March 16, 2005
Senior Debt
Outlook
Date of Last Action
The cost and availability of unsecured financing is influenced by credit ratings, which are intended to be an indicator of the
creditworthiness of a particular company, security, or obligation. Lower ratings generally result in higher borrowing costs as well
reduced access to capital markets. However, because of management’s focus on diversifying and expanding the Company’s
funding sources over the past few years, and based on the Company’s current liquidity position, management believes that the
Company has taken appropriate steps to withstand further action by the rating agencies, if that were to occur in the future.
The Company’s liquidity, as well as its ongoing profitability, is in large part dependent upon its timely access to capital and the
costs associated with raising funds in different segments of the capital markets. Over the past several years, the Company’s
funding strategy has focused on managing liquidity risk through the development of diversified funding sources across a varied
investor base and management of debt maturities over a longer period of time, thereby, increasing the amount of available cash
balances ($2.8 billion at December 31, 2004 as compared to $2.4 billion at December 31, 2003 and $0.8 billion at December 31,
2002). This strategy, combined with a continuous prefunding of requirements, is designed to meet the Company’s ongoing cash
flow requirements. In developing the funding strategy, management considers market conditions, prevailing interest rates,
liquidity needs, and the desired maturity profile of its liabilities. The diversity of the Company’s funding sources enhances
funding flexibility, limits dependence on any one source of funds, and results in a more cost effective long-term strategy. This
strategy has helped the Company maintain liquidity during periods of weakness in the capital markets, changes in the
Company’s business, or changes in the Company’s credit ratings.
*****
26
GENERAL MOTORS ACCEPTANCE CORPORATION OF CANADA, LIMITED
The business of GMACCL is financed by capital funds, intermediate and long-term debt, short, medium, and long-term notes
offered on a continuous basis and borrowings under bank lines of credit.
The Company offers its commercial paper in Canada directly to investors, in physical note or book-entry form, to mature on any
business day selected by the investor, with a maximum maturity of 365 days. GMACCL commercial paper is available payable
to a named payee and is issued on a discount or interest-bearing basis at identical yields. GMACCL commercial paper is
payable upon maturity at the registered office of the Company (the minimum investment may vary depending on province of
residence).
GMACCL also sells medium-term notes in Canada through dealer agents and directly to the public on a continuous basis. These
notes are offered by prospectus and may be issued in registered form for any maturity of over one year. The minimum
investment is $25,000 with interest payable monthly, quarterly, semi-annually or annually to the registered holder. At the option
of the investor, notes with maturities from more than one year to less than two years may also be offered with interest payable at
maturity. Both the principal and interest payable with respect to medium-term notes are paid at the registered office of the
Company.
General Motors Acceptance Corporation, a Delaware corporation, unconditionally guarantees both principal and interest on
GMACCL’s commercial paper and medium-term notes.
The commercial paper and medium-term notes are offered by the Company across Canada. A prospectus for medium-term
notes and additional information may be obtained by contacting the Company’s registered office located at:
3300 Bloor Street West
Suite 2800
Toronto, Ontario M8X 2X5
Toronto area investors
Phone: (416) 234-6616
Quebec investors
Phone: (514) 856-8244
Investors outside of Toronto and Quebec
Phone: (800) 268-2508
Prevailing rates for GMACCL commercial paper and medium-term notes in Canada may be obtained by calling the following
numbers:
Toronto area investors
Phone: (416) 234-6629
Quebec investors
Phone: (514) 856-8872
Investors outside of Toronto and Quebec
Phone: (800) 268-2506
GENERAL MOTORS ACCEPTANCE CORPORATION OF CANADA, LIMITED