Audi 2015 Annual Report Download - page 237

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
RECOGNITION AND MEASUREMENT PRINCIPLES
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Deferred tax assets and deferred tax liabilities are netted if the
taxable entities and maturities are identical. Deferred taxes are
reported pursuant to IAS 1 in relation to non-current assets/
liabilities.
/INVENTORIES
Raw materials and supplies are measured at the lower of aver-
age cost of purchase or net realizable value. Other acquisition-
related costs and cost reductions are taken into account as
appropriate.
Work in progress and finished goods are measured at the lower
of cost of production or net realizable value. Cost of goods sold
includes direct materials and direct production wages, as well as
a directly attributable portion of the necessary indirect mate-
rials and indirect labor costs, scheduled production-related
depreciation, and expenses attributable to the products from
the scheduled amortization of capitalized production devel-
opment costs. Distribution costs, administrative expenses and
interest on borrowed capital are not capitalized.
Finished goods and products are measured at the lower of cost
of purchase or net realizable value.
Provision is made for all discernible storage and inventory risks
in the form of appropriate reductions in the carrying amounts.
Individual adjustments are made on all inventories as soon as
the probable proceeds realizable from their sale or use are
lower than the carrying amounts of the inventories. The net
realizable value is deemed to be the estimated proceeds of
sale less the estimated costs incurred up until the sale.
Current leased assets comprise leased vehicles with an operate
lease of up to one year and vehicles that are subject to a buy-
back obligation within one year owing to buy-back agreements.
These vehicles are capitalized at cost of goods sold and mea-
sured in accordance with the expected loss of value and likely
useful life. Based on local factors and historical values from
the marketing of used cars, updated internal and external
information is incorporated into the measurement on an on-
going basis.
/SECURITIES, CASH AND CASH EQUIVALENTS
Securities held as current assets are measured at market value,
i.e. at the trading price on the balance sheet date. Cash and
cash equivalents are stated at their nominal value. The cash
figures encompass cash and cash equivalents. Included under
cash equivalents are financial resources that are highly liquid
with an insignificant risk of fluctuations in value.
The Audi Group is integrated into the financial management of
the Volkswagen Group. As part of cash pooling arrangements,
balances are settled on a daily basis and transformed into
amounts owed to or by companies of the Volkswagen Group.
This increases the efficiency of both intra-Group and external
transactions and also reduces transaction costs. The cash pool
receivables are allocated to cash and cash equivalents on the
basis of their character as cash equivalents.
/PROVISIONS FOR PENSIONS
Actuarial measurement of provisions for pensions is based on
the projected unit credit method for defined retirement bene-
fit plans as specified in IAS 19. This method takes account of
pensions and entitlements to future pensions known at the
balance sheet date as well as anticipated future pay and pen-
sion increases. The actuarial interest rate continues to be de-
termined on the basis of profits realized on the capital market
for prime-rated corporate bonds. Individual parameters used
to measure provisions for pensions are described in Note 30.
Any effects resulting from the new measurement are reported
in equity as retained earnings taking account of deferred taxes
and with no effect on profit or loss.
/INCOME TAX OBLIGATIONS
Income tax liabilities comprise current income tax obligations.
Deferred taxes are reported under separate balance sheet and
income statement items. Provisions are created for potential
tax risks based on the best estimate.
/OTHER PROVISIONS
In accordance with IAS 37, provisions are recognized if a current
obligation existing toward third parties on the basis of a past
event is likely to lead to cash outflows and where the amount
of the obligation can reliably be estimated. Provisions are not
offset against recourse entitlements. Provisions with a remain-
ing term of over one year are measured at their discounted
settlement value as of the balance sheet date. Market rates
are used as the discount rates. A nominal interest rate of
0.5 (0.4) percent was applied within the eurozone. The settle-
ment value also includes the expected cost increases. The non-
current portions of provisions for long-service awards were
discounted at 2.7 (2.3) percent.