General Motors Corporation and Subsidiaries - Page 7




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               B.  Dealer Finance Income                                               
               "Dealer finance income", "dealer allowance credit", and                 
          "dealer participation" are terms used to describe certain amounts            
          paid or credited by GMAC to independent GM dealers in connection             
          with the assignment of an RISC by an independent GM dealer to                
          GMAC.4  Dealer finance income was produced when an independent GM            
          dealer assigned to GMAC an RISC bearing an interest rate that is             
          higher than the GMAC buy rate.                                               
               When GMAC acquired an RISC from an independent GM dealer,               
          GMAC paid or credited the independent GM dealer the fair market              
          value of the assigned RISC at the time of purchase.  The fair                
          market value was computed using the GMAC buy rate (i.e., the RISC            
          was discounted to present value based on the GMAC buy rate).                 
          When a retail customer's RISC carried an interest rate greater               
          than the GMAC buy rate, the fair market value was higher than the            
          face amount of the RISC, and the amount GMAC paid in excess of               
          the face amount of the RISC was dealer finance income.5  If the              
          retail customer paid off its RISC early, the independent GM                  




               4  For convenience, we shall hereinafter refer to these                 
          terms as dealer finance income.                                              
               5  The opinion, infra pp. 32-38, contains examples                      
          calculating dealer finance income and rate support payments and              
          explaining GM's and GMAC's accounting for rate support.  For an              
          example of dealer finance income, see infra p. 32.                           




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