Chrysler 2004 Annual Report Download - page 95

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Consolidated Financial Statements at December 31, 2004 – Notes to the Consolidated Financial Statements
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FORM AND CONTENT OF THE CONSOLIDATED
FINANCIAL STATEMENTS
The 2004 consolidated financial statements have been
prepared in accordance with the rules contained in Italian
Legislative Decree No. 127 dated April 9, 1991, which fulfilled
the Fourth and Seventh EC Directives and the revisions
introduced by Legislative Decree No. 6 of 2003 “Reform of
Corporate Law”. The significant events which occurred after
the end of the fiscal year described in the Report of
Operations are an integral part of the notes to the
consolidated financial statements.
The consolidated financial statements include the financial
statements of Fiat S.p.A., the Parent Company, and of all
Italian and foreign subsidiaries that constitute the Fiat Group
(“Fiat” or “The Group”), in which Fiat S.p.A. holds directly or
indirectly more than 50% of the voting capital and/or has de
facto control over operations. The companies in which the
Parent Company holds, directly or indirectly, control jointly with
other partners, are normally accounted for using the equity
method. The same is true for the associated companies in
which the Group exercises a significant influence.
Certain insignificant subsidiaries, including those acquired for
resale, which total less than 0.3% in 2004 (0.3% in 2003 and
0.5% in 2002) of total consolidated revenues and for which it is
not practicable to obtain the necessary information on a timely
basis without disproportionate expense, have been excluded
from consolidation. This exclusion does not affect the assertion
that the consolidated financial statements are a true and fair
representation of the financial position and results of
operations of the Group. Furthermore, the subsidiary BUC –
Banca Unione di Credito, as allowed by law, has been
excluded from the scope of consolidation inasmuch as it has
non-homogeneous operations and is accounted for using the
equity method.
As discussed in Report on Operations, the composition of the
Fiat Group underwent several significant changes in 2004,
and in particular:
■In February 2004, 100% of the interest held in Fiat
Engineering S.p.A. was sold to Maire Investimenti S.p.A.
and the company was therefore deconsolidated as of the
beginning of the year. At the same time, the Fiat Group
subscribed to a capital increase at Maire Investimenti S.p.A.
(now Maire Engineering S.p.A.) and currently owns 30% of
the capital of this company. On said 30% interest, both
parties hold put (Fiat Group) and call (Maire Engineering
S.p.A.) options that are exercisable within three years at a
predetermined price.
■In the second quarter of 2004, the Group consolidated
Magneti Marelli Electronic Systems (formerly Ixfin Magneti
Marelli Sistemi Elettronici) on a line-by-line basis following
gradual acquisition of actual control over this strategic
supplier of Fiat Auto and other automotive groups. In 2002
this business had been sold to the Mekfin Group, which in
turn sold it to the Ixfin Group. So that the company would
punctually respect the commitments it had made to its
customers and continue pursuing its growth strategies, an
agreement was signed at the end of 2003 between the Ixfin
Group and the Fiat Group, on the basis of which Magneti
Marelli, pursuant to an agreement providing for the
beneficial interest in the shares of Ixfin Magneti Marelli
Sistemi Elettronici, started to take an increasingly active role
in the management of Electronic Systems in 2004. Finally,
on July 28, 2004 the Fiat Group decided to acquire full
ownership thereof by exercising a call option.
■In September, Magneti Marelli sold the 100% interest in
the Midas business (automotive repair and maintenance
services) in Europe and Latin America to the Norauto Group
and deconsolidated the related activities from September
30, 2004.
For a better understanding of the variations in the statement
of operations, it should be noted that major changes in the
composition of the Group took place during 2003, the most
important of which that had an impact on 2004 are indicated
below:
■At the end of March 2003, the retail financing activities of
Fiat Auto Holdings in Brazil were sold to the Itaù banking
group and deconsolidated from that date.
■On May 2, 2003, the agreement for the sale of the Toro
Assicurazioni Group to the DeAgostini Group was executed
and the Toro Group was deconsolidated as of that date.
■On May 27, 2003, Fiat and a pool of banks completed the
sale of 51% of Fidis Retail Italia (FRI), a company which at
that time controlled part of the European consumer credit
business of Fiat Auto Holdings for retail automobile
purchases; another part of this business was sold to FRI in
October 2003, while the sale of the Company operating in
the United Kingdom was concluded in 2004.
■In July 2003 the agreement was executed for the sale of
the aerospace activities of FiatAvio S.p.A. to Avio Holding
S.p.A., 70% owned by The Carlyle Group and 30% by
Finmeccanica S.p.A.
PRINCIPLES OF CONSOLIDATION AND SIGNIFICANT
ACCOUNTING POLICIES
The consolidated financial statements have been prepared
from the statutory financial statements of the Group’s single
companies or consolidated Sectors approved by the Boards
of Directors and adjusted, where necessary, by the directors
of the companies to conform with Group accounting principles
and to eliminate tax-driven adjustments. The Group’s
accounting principles respect the requirements set forth by
Legislative Decree No. 127 of April 9, 1991, interpreted and
supplemented by the Italian accounting principles issued by