Chrysler 2003 Annual Report Download - page 78

77 Fiat Group Consolidated Financial Statements at December 31, 2003
Notes to the Consolidated Financial Statements
Revenues from sales of products are recognized at the moment
title passes to the customer, which is generally at the time of
shipment. Under contracts for vehicle sale and buy-back at a
specified price, a specific reserve for future risks and charges
is set aside based on the difference between the guaranteed
residual value and the estimated realizable value of the used
asset, taking into account the probability that such option will
be exercised; this reserve is set up at the time of the initial sale
and adjusted periodically over the period of the contract.
Revenues from services are recorded when they are performed.
Revenues from long-term contracts are recognized using the
percentage of completion method.
Revenues from sales and services include income from
the normal business of the financial services companies.
Revenues also include amounts received from financing leases,
net of depreciation, and income from company assets on
operating leases.
With regard to the Insurance Sectors insurance premiums
are recognized on an accrual basis.
Costs
Costs are recognized on an accrual basis.
Research and development costs are principally charged to the
statement of operations in the period in which they are incurred.
Research-related revenue grants provided by the Government
or the EU are credited to the statement of operations when
collection becomes certain.
Advertising and promotion expenses are charged to the
statement of operations in the year incurred.
Estimated product warranty costs are charged to the statement
of operations at the time the sale is recorded.
The Costs of production include the interest and expenses in
the normal course of business of the financial services companies,
as well as insurance claims and other technical costs of the
insurance companies.
Financial income and expenses
Financial income and expenses are recorded on an accrual
basis.
Income and expenses resulting from derivative financial
instruments, as well as relevant year-end exchange differences,
are included in the statement of operations in accordance with
the above mentioned policies disclosed under memorandum
accounts.
Costs relating to the factoring of receivables and notes
of any type (with recourse, without recourse, securitization)
and nature (trade, financial, other) are charged to the statement
of operations on an accrual basis.
Income taxes
Income taxes currently payable are provided for in accordance
with the existing legislation of the countries in which the Group
operates.
Deferred tax liabilities or deferred tax assets are determined on
all the temporary differences between the consolidated assets
and liabilities and the corresponding amounts for purposes
of taxation, including those deriving from the most significant
consolidation adjustments. As allowed by the applicable
Accounting Principles, deferred tax assets are also recorded
to account for the tax benefit of tax loss carryforwards whenever
the specific conditions for future recoverability are met.
In particular, deferred tax assets have only been recorded
if there is a reasonable certainty of their future recovery.
Deferred tax liabilities are not recorded if it is unlikely that
a future liability will arise.
Deferred tax assets and liabilities are offset if they refer to
the same company and to taxes which can be compensated.
The balance from offsetting the amounts is recorded in
Other receivables in current assets, if a deferred tax asset,
and in the Deferred tax reserve, if a deferred tax liability.
MAJOR DIVESTITURES DURING THE YEAR
As described in the Report on Operations, the Group carried
out significant divestitures during the year which are reviewed
below:
❚The agreement to sell Toro Assicurazioni to the DeAgostini
Group was signed on May 2, 2003. The conditions precedent
stated in the agreement for the issuance of the requisite
authorization by the competent authorities have since been
met, making the transaction effective as of the date of the
signing of the agreement. The sale price was 2,378 million
euros, with a net gain of 390 million euros. The Sector’s
operations were therefore deconsolidated as of the same
date (May 2003). The sales proceeds were collected on July
30, 2003, concurrently with the official transfer of the Toro
Assicurazioni shares.
❚On May 27, 2003, as part of the agreement signed by Fiat
and Capitalia, Banca Intesa, SanPaolo IMI and Unicredito
on March 11, 2003, and following approval by the competent
authorities, the first part of the transaction was concluded
upon the sale of the majority interest (51%) and the
consequent deconsolidation of Fidis Retail Italia, the company
which controls the European activities of Fiat Auto Holdings
in the field of retail consumer financing for automobile
purchases. The sale was finalized in October 2003 upon
the deconsolidation and transfer to Fidis Retail Italia of
the holdings in the other financial companies covered by
the agreement, with the sole exception of the company
operating in the United Kingdom. Additional information
on the contract details is presented in Note 3.