NOTES TO THE FINANCIAL STATEMENTS NOTE 1. Principles of Presentation and Consolidation (Continued) The table below reconciles the revised presentation of our Consolidated Statement of Cash Flows for the years ended December 31, 2004, 2003 and 2002 to the prior presentation (in millions): * In addition to vehicles sold by us, the cash flows from wholesale finance receivables being reclassified from investing to operating include financing by Ford Credit  of used and non-Ford vehicles. 100% of cash flows from wholesale finance receivables have been reclassified for consolidated presentation as the portion of these  cash flows from used and non-Ford vehicles are impracticable to separate. Cash and all highly liquid investments with a maturity of three months or less at the date of purchase, including short-term time  deposits and government agency and corporate obligations, are classified as  Cash and cash equivalents. Sales are generally recorded when products are shipped to customers (primarily dealers) and ownership is transferred. Sales to daily  rental car companies with a guaranteed repurchase option are accounted for as operating leases. The lease revenue is recognized  over the term of the lease and a gain or loss on the remaining residual value is recognized when the vehicles are sold at auction. The  carrying value of these vehicles is included in other current assets and, as of December 31, 2004, was $2.9 billion. Income generated from cash and cash equivalents, investments in marketable securities, loaned securities and other  miscellaneous receivables is reported as  Interest income and other non-operating income/(expense), net. Revenue from finance receivables, including interest, net of certain deferred loan origination costs that are included as a  reduction of financing revenue, is recognized over the term of the receivable using the interest method. Revenue from operating  leases, net of certain deferred origination costs, is recognized on a straight-line basis over the term of the lease. The accrual of  interest on receivables is discontinued at the time a receivable is determined to be uncollectible. Subsequent amounts of interest  collected are recognized in income only if full recovery of the remaining principal is probable. Interest supplements paid by the  Automotive sector are recognized over the term of the receivable or operating lease.  The preparation of financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) requires  management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of  contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the periods reported.  Estimates are used when accounting for certain items such as marketing accruals, warranty costs, employee benefit programs,  etc. Estimates are based on historical experience, where applicable, and other assumptions that management believes are  reasonable under the circumstances. Due to the inherent uncertainty involved in marketing estimates, actual results may differ  from those estimates under different assumptions or conditions. Automotive marketing incentives, including customer and dealer cash payments and costs for special financing and leasing  programs paid to the Financial Services sector are recognized as revenue reductions and are accrued at the later of the date the  related vehicle sales are recorded or the date the incentive program is both approved and communicated. Costs for marketing  incentives are based on assumptions regarding the number of vehicles that will have a specific incentive applied against them.  6 2 Marketing Incentives Use of Estimates Revenue Recognition - Financial Services Sector Revenue Recognition - Automotive Sector Cash and Cash Equivalents NOTE 2. SUMMARY OF ACCOUNTING POLICIES  2004  2003  2002 Net cash flows from operating activities:  Automotive sector  $ 6,998 $  2,948 $  3,099  Financial Services sector  15,593 16,486 14,663 Sum of sector operating cash flows (prior presentation) 22,591 19,434 17,762 Reclassification from investing cash flows* 1,923 (2,154) (6,023) Consolidated net cash flows from operating activities $ 24,514 $ 17,280 $ 11,739 Net cash flows from investing activities:  Automotive sector  $ (1,705) $  (2,852) $  (5,741)  Financial Services sector  (6,862) 1,404 3,923  Elimination of net intersector investing activity (4,361) (3,708) (1,053) Sum of sector investing cash flows (prior presentation) (12,928) (5,156) (2,871) Reclassification to operating cash flows* (1,923) 2,154 6,023 Consolidated net cash flows from investing activities $ (14,851) $  (3,002) $  3,152