Audi 2007 Annual Report Download - page 193

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Actuarial measurement of provisions for pensions is based on the Projected Unit Credit
Method for defined retirement benefit plans as specified in IAS 19 (Employee Benefits). This
method takes into account pensions and entitlements to future pensions known at the bal-
ance sheet date as well as anticipated future pay and pension increases.
Actuarial gains and losses are reported in a separate line item within equity, with no ef-
fect on income, after taking deferred tax into account.
In accordance with IAS 37, provisions are recognized if an obligation existing toward third
parties is likely to lead to cash outflows and where the amount of the obligation can reliably
be estimated.
Pursuant to IAS 37, the other provisions for all discernible risks and uncertain liabilities
are reported at their probable cost and are not offset against recourse entitlements.
Provisions with over one year to maturity are measured at their discounted settlement
value as of the balance sheet date. Market rates are used as the discount rates. Since the
settlement value pursuant to IAS 37 also includes the cost increases to be taken into ac-
count on the balance sheet date, a nominal interest rate of 5.2 percent was applied in
Germany.
To some degree, the preparation of the Consolidated Financial Statements involves making
assumptions and estimates with regard to the level and disclosure of the recognized assets
and liabilities, income and expenditure, and contingent liabilities for the reporting period.
The assumptions and estimates relate principally to the reporting and measurement of
intangible assets, the Group-wide determination of the useful life of property, plant and
equipment and investment property, the collectability of receivables and the recognition
and measurement of provisions.
The assumptions and estimates are based on premises that reflect the facts as known at
any given time. In particular, the circumstances at the time of preparation of the Consoli-
dated Financial Statements and the development of the global and industry environment
deemed to be realistic were utilized as the basis with regard to anticipated future business
developments. Developments in this underlying situation that deviate from the assumptions
and are beyond management’s sphere of influence may mean that the actual amounts will
differ from the estimates originally anticipated. If the actual development varies from the
anticipated development, the premises and, if necessary, carrying amounts for the assets
and liabilities in question are adjusted accordingly.
At the time of the preparation of the Consolidated Financial Statements, the underlying
assumptions and estimates were not subject to any significant risks. As matters stand,
therefore, no significant adjustment to the carrying amounts for the assets and liabilities
stated in the Consolidated Financial Statements is expected in the following fiscal year.
The assumptions utilized as the basis for management’s estimates and assessments are
explained in the “Report on expected developments” in the Management Report.
Provisions for pensions
Other provisions
Management’s estimates
and assessments