Hey Accountants! When does GM Recognize the Revenue on the Camaro?

[Sloppy Joe]

Just wondering if GM recognizes the revenue when the Camaro is produced, when the car is shipped/invoiced or when it's delivered? I think it's when they invoice the dealer? If that's right, wouldn't it be in GMs best interest to produce as many cars as possible prior to bankruptcy and then hold off invoicing/shipping them until after they emerg from bankruptcy? If they invoice/ship after bankruptcy that revenue hits the bottom line of the new company, right? My thought is if they hold as many cars as possible and invoice/ship them all out as soon as they come out of bankruptcy it would huge and immediate revenue boost to the bottom line. This revenue injection shows that the "New" GM can be profitable right out of the gate.. and Wallstreet loves that. I could be dead wrong though, I'm certainly no Accountant.

[Hylton]

They are so far in the whole financially that they would need to sell 1,000 Camaros a day in order for it to make an impact.

[Sloppy Joe]

What if they are using this strategy on all GM car models/brands not just the Camaro? that would be a lot of vehicles.... depending on how many cars they can sit on, it could be many more than 1000 per day... for a while anyhow? Plus, I don't think they have to actually sell the vehicle to a consumer, they only have to invoice the dealer to be able to recongnize the revenue. Everything counts, pre-orders, dealer orders, dealer stock, parts, everything they could possibly invoice a dealer in the US an abroad. Again a lot of the cost to produce the cars would be recognized prior to bankruptcy, but revenue would be recognized after bankruptcy, so everyone of these cars would be very profitable to the "New" GM?

[moto-camaro]

That all depends on General Motors 'Revenue Recognition' policy, contained in their Annual Report.

Originally Posted by General Motors Corporation 2007 Annual Report

REVENUE RECOGNITION
Automotive Sales
Automotive sales consist primarily of revenue generated from the sale of vehicles. Vehicle sales are recorded when the title and risks and rewards of ownership have passed, which is generally when the vehicle is released to the carrier responsible for transporting vehicles to dealers. Provisions for recurring dealer and customer sales and leasing incentives, consisting of allowances and rebates, are recorded as reductions to Automotive sales at the time of vehicle sales. Additionally, all other incentives, allowances, and rebates related to vehicles previously sold are recognized as reductions to Automotive sales when announced.

Vehicle sales to daily rental car companies with guaranteed repurchase obligations are accounted for as Equipment on operating leases, net. Lease revenue is recognized ratably over the term of the lease based on the difference between net sales proceeds and the guaranteed repurchase amount. Equipment on operating leases, net is depreciated based on the difference between the cost of the vehicle and estimated residual value using the straight-line method over the term of the lease agreement. Management reviews residual values periodically to determine that estimates remain appropriate, and if an asset is impaired losses are recognized at the time of the impairment.

So to your question when do they recognize the revenue on the sale of vehicles, it's at shipment, when it's released for transport.


and in case anyone wants the URL to the annual report, you can get them from their site here: 2007 annual report, the Revenue Recognition policy is on P. 86 of the 2007 annual report http://www.gm.com/corporate/investor...ckholder_info/

[Sloppy Joe]

Cool, Thank Moto!