Chrysler 2005 Annual Report Download - page 208

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Transition to International Financial Reporting Standards (IFRS) by Fiat S.p.A.
Transition to International Financial
Reporting Standards (IFRS) by Fiat S.p.A.
As a result of the implementation of European Regulation no. 1606
of July 19, 2002, the Fiat Group has adopted International Financial
Reporting Standards (IFRS) for the preparation of its consolidated
financial statements with effect from January 1, 2005. O n the basis
of Italian law implementing this regulation, the statutory financial
statements of the Parent Company Fiat S.p.A. will be prepared
in accordance with these standards from fiscal 2006.
As a consequence, Fiat is currently making the transition to IFRS
for its statutory financial statements and will report its 2006 first
half results and prior year comparatives in accordance with IFRS.
This note describes the policies that Fiat has adopted in preparing
its IFRS opening balance sheet at January 1, 2005, as well as the main
differences in relation to Italian GAAP used to prepare its statutory
financial statements up until D ecember 31, 2005.
As part of this transition programme, an opening balance sheet
of Fiat S.p.A. at January 1, 2005 will be prepared in accordance
with IFRS 1 – First-time Adoption of International Financial Reporting
Standards, on the basis of the IFRS applicable from January 1, 2006,
as published at December 31, 2005. In particular, the amendments
to IFRS 4 and IAS 39 issued in 2005 and effective from January 1,
2006 will be applied, which regard the measurement and recognition
of financial guarantee contracts in the financial statements of the
guarantor and the limitation in the use of the “fair value option”
to financial instruments satisfying specific conditions.
FIRST-TIME ADO PTION O F IFRS
General principle
In accordance with IFRS 1, the Parent Company Fiat S.p.A. is
required to apply the accounting standards in force at the reporting
date for its first IFRS financial statements retrospectively to all periods
presented, except for one permitted exemption adopted by Fiat S.p.A.
and described in the following paragraph.
The opening IFRS balance sheet at January 1, 2005 will therefore
reflect the following differences with the statutory balance sheet
prepared at December 31, 2004 in accordance with Italian GAAP:
all assets and liabilities qualifying for recognition under IFRS,
including assets and liabilities that were not recognised under Italian
GAAP, will be recognised and measured in accordance with IFRS;
all assets and liabilities recognised under Italian GAAP that do
not qualify for recognition under IFRS will be eliminated;
certain balance sheet items will be reclassified in accordance with IFRS.
The impact of these adjustments will be recognised directly in
opening equity at January 1, 2005, the date of transition to IFRS.
In summary, the assets and liabilities to be included in the statutory
financial statements of the Parent Company Fiat S.p.A. prepared
in accordance with IFRS will be recognised and measured in the
same manner as that used to prepare the financial statements drafted
for inclusion in the Group’s consolidated financial statements, in
accordance with IFRS 1, with the exception of consolidation entries.
O PTION AL EXEMPTIO N ADO PTED BY FIAT S.P.A.
Employee benefits:Fiat S.p.A. has elected to recognise all cumulative
actuarial gains and losses that existed at January 1, 2005, but will use
the corridor approach for those arising after that date.
DESCRIPTIO N O F THE MAIN D IFFEREN CES
BETW EEN ITALIAN GAAP AN D IFRS
The following paragraphs provide a description of the main differences
between Italian GAAP and IFRS that will have effect on the statutory
financial statements of Fiat S.p.A.
1.W rite-off of deferred costs
Under Italian GAAP, Fiat S.p.A. defers and amortises certain costs
(mainly start-up and expansion costs). IFRS require these to be
expensed when incurred.
In particular, costs incurred in connection with share capital increases
which are deferred and amortised under Italian GAAP are deducted
directly from the proceeds of the increase and debited to stockholders’
equity under IFRS.
2.Valuation of investments in other companies not held
as current assets
In the financial statements of Fiat S.p.A. prepared in accordance with
Italian GAAP, equity investments included under financial fixed assets