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GM Automotive Revenue Recognition

GM office building. Flickr Image.

GM derived its automotive revenue from the following segments:

  • 1. New vehicles sales
  • 2. Parts and accessories sales
  • 3. Used vehicles sales
  • 4. Services and others

New vehicles sales

Revenue for new vehicle sales is recognized at the time of delivery when customers obtain control of the vehicles or when the vehicles are transferred to the dealers which generally occurs when the vehicles are released to the carrier responsible for transporting to the dealers. The recognized revenue excludes any sales incentives paid to customers and dealers. The sales incentives are estimated based on historical experiences and assumptions. Besides, any taxes collected at the time of sales are also excluded from revenue.

A portion of the revenue is deferred for separate performance obligations such as maintenance and vehicle connectivity, that will be provided to customers at a future date. These revenues will be recognized when the performance obligations are delivered.

For vehicles sales to daily rental companies that contain a substantive repurchase obligation, these transactions will be accounted for as operating leases. As far as my understanding goes, the revenues are deferred and a portion of the sales proceeds are recorded as a liability for the guaranteed repurchased amount until the guaranteed period expires. The other portion of the deferred revenue will be recognized ratably over the estimated term of lease.

The company has adopted ASU 2014-09 beginning Jan 1, 2018. This has affected the revenue recognition for vehicles sales to daily rental companies. Prior to Jan 1, 2018, vehicles sales to daily rental companies were accounted for as operating lease. But beginning Jan 1, 2018, these transactions are accounted for as sales, with revenue recognized at the time of transfer.

However, for vehicles sales to daily rental companies that still contain substantive repurchase obligation, these transactions continue to be accounted for as operating lease, with revenue recognized over the term of the lease.

Parts and accessories sales

Similarly, revenues for parts and accessories sales are recognized when customers obtain control of the items, taxes and sales incentives are excluded. The parts and accessories sold contains rights of return. To account for the return of parts and accessories sold, the revenue will exclude an estimated return based on the company historical data of customer returns.

Used vehicles sales

Used vehicles sales normally involves the auction of vehicles returned from daily rental car companies and vehicles used by GM employees. Revenue is recognized upon transfer of control of the vehicle to customer.

Services and Others

Revenues from services and others consists of sales from vehicle-related service arrangement and after-sale services such as maintenance, vehicle connectivity and extended service warranties. Revenues for service arrangement that are bundled with vehicle sales are allocated to this segment and recognized as deferred revenue as a liability in the balance sheet. The deferred revenue liability is amortized to revenue when services are performed.


1. Revenue recognition guideline in this page was obtained from General Motors financial statements: GM SEC Filing.

2. Images were obtained from juan Carlos jara guzman and Michael Kumm.

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