PRESENTATION

For purposes of this report, “Ford,” the “Company,” “we,” “our,” “us” or similar references mean Ford Motor Company, our consolidated subsidiaries and our consolidated VIEs of which we are the primary beneficiary, unless the context requires otherwise.

We prepare our financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). We present the financial statements on both a consolidated basis and on a sector basis for our Automotive and Financial Services sectors. The additional information provided in the sector statements enables the reader to better understand the operating performance, financial position, cash flows, and liquidity of our two very different businesses. We eliminate all intercompany items and transactions in the consolidated and sector balance sheets. In certain circumstances, presentation of these intercompany eliminations or consolidated adjustments differ between the consolidated and sector financial statements. These line items are reconciled below under “Reconciliations between Consolidated and Sector Financial Statements” or in the related financial statements and footnotes.

We reclassified certain prior year amounts in our consolidated financial statements to conform to current year presentation.

Changes in Accounting

Disability Accounting. We provide medical, life, and income benefits to hourly and salary employees when they become disabled. As of January 1, 2014, we changed our accounting policy for these benefits from an event-driven model to a service-accrual model, such that our obligation now includes an estimated cost to be incurred for individuals who are disabled at the time of measurement (which was the amount recorded under our previous policy) as well as an amount that considers the probability that active employees will become disabled in the future. We believe this change in accounting method is preferable because it better aligns the recognition of expense with the periods in which the Company receives the benefit of the employees’ services, and will allow for better comparability with the method used by other companies in our industry.

We have retroactively applied this change in accounting method to all prior period amounts. As of December 31, 2011, the cumulative effect of the change decreased Total equity by $250 million.

The cumulative effect of this change on our consolidated balance sheet at December 31 was as follows (in millions):



	Revised 2013		As Originally Reported 2013		Effect of change
Deferred income taxes	$	13,468	$	13,315	$	153
Other liabilities and deferred revenue	40,886		40,462		424
Total equity	26,145		26,416		(271		)



	Revised 2012		As Originally Reported 2012		Effect of change
Deferred income taxes	$	15,350	$	15,185	$	165
Other liabilities and deferred revenue	48,727		48,259		468
Total equity	15,686		15,989		(303		)

The effect of this change was immaterial to our consolidated income statement and consolidated statement of cash flows for the years ended December 31, 2014, 2013, and 2012.

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.

NOTE 1. PRESENTATION (Continued)

Reconciliations between Consolidated and Sector Financial Statements

Sector to Consolidated Deferred Tax Assets and Liabilities. The difference between the total assets and total liabilities as presented on our sector balance sheet and consolidated balance sheet is the result of netting deferred income tax assets and liabilities. The reconciliation between the totals for the sector and consolidated balance sheets at December 31 was as follows (in millions):



	2014			2013
Sector balance sheet presentation of deferred income tax assets
Automotive sector current deferred income tax assets	$	2,039		$	1,574
Automotive sector non-current deferred income tax assets	13,331			13,436
Financial Services sector deferred income tax assets (a)	185			184
Total	15,555			15,194
Reclassification for netting of deferred income taxes	(1,916		)	(1,726		)
Consolidated balance sheet presentation of deferred income tax assets	$	13,639		$	13,468

Sector balance sheet presentation of deferred income tax liabilities
Automotive sector current deferred income tax liabilities	$	270		$	267
Automotive sector non-current deferred income tax liabilities	367			430
Financial Services sector deferred income tax liabilities	1,849			1,627
Total	2,486			2,324
Reclassification for netting of deferred income taxes	(1,916		)	(1,726		)
Consolidated balance sheet presentation of deferred income tax liabilities	$	570		$	598

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(a)	Financial Services deferred income tax assets are included in Financial Services Other assets on our sector balance sheet.

Certain Transactions Between Automotive and Financial Services Sectors

Intersector transactions occur in the ordinary course of business. Additional detail regarding certain transactions and the effect on each sector’s balance sheet at December 31 was as follows (in billions):



	2014					2013
	Automotive		Financial Services			Automotive			Financial Services
Finance receivables, net (a)			$	5.0					$	3.3
Unearned interest supplements and residual support (b)			(3.9		)				(3.1		)
Wholesale receivables/Other (c)			0.8						0.8
Net investment in operating leases (d)			0.6						0.6
Intersector receivables/(payables) (e)	$	—	—			$	(0.2	)	0.2

__________


(a)	Automotive sector receivables (generated primarily from vehicle and parts sales to third parties) sold to Ford Credit. These receivables are classified as Other receivables, net on our consolidated balance sheet and Finance receivables, net on our sector balance sheet.


(b)	We pay amounts to Ford Credit at the point of retail financing or lease origination that represent interest supplements and residual support.


(c)	Primarily wholesale receivables with entities that are consolidated subsidiaries of Ford.


(d)	Sale-leaseback agreement between Automotive and Financial Services sectors relating to vehicles that we lease to our employees.


(e)	Amounts owed to the Financial Services sector by Automotive sector, or vice versa.