Chrysler 2005 Annual Report Download - page 218

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Fiat S.p.A. Financial Statements at D ecember 31, 2005 - N otes to the Financial Statements
the option exercise price when the shares are to be used for stock
options.
If in subsequent fiscal years the reasons for these adjustments are
no longer valid, the writedowns are reversed.
A corresponding treasury stock reserve for the same amount is
recorded in the balance sheet under stockholders’ equity.This reserve
cannot be used to cover losses.
Receivables and payables
Accounts receivable are shown at their estimated realisable value, which
represents the difference between their face value and the adjustments
included in the allowance for doubtful accounts.The individual items
are shown in the balance sheet net of the respective allowances.
The amount of these allowances is determined in accordance with a
prudent estimate of uncollectible amounts, based on past experience,
and reflects the risks associated with specific delinquent accounts.
Receivables and payables denominated in the currencies of countries
not belonging to the EMU are expressed in euros at the spot
exchange rate on the closing date of the fiscal year, and the relative
exchange losses and gains are posted to the income statement.
Any net income arising is set aside, for the portion not used to cover
any loss for the year, in a special reserve that cannot be distributed
until the gain is realised.
Accruals and deferrals
Accruals and deferrals are determined by the accrual method, in
accordance with the general principle of assigning revenues and
expenses to the accounting period in which they are earned or incurred.
Reserves for risks and charges
Reserves for risks and charges are established to cover costs or liabilities
the occurrence of which is probable or certain at the end of the fiscal
year, but which are indeterminable either as to amount or timing.
Reserve for employee severance indemnities
The reserve for employee severance indemnities represents the
actual liability toward employees accrued as of the end of the fiscal
year and is adjusted each year in accordance with current laws
and collective bargaining agreements.
M emorandum Accounts
Suretyships and other unsecured guarantees
Suretyships and other unsecured guarantees granted on behalf of
subsidiaries and others are posted under memorandum accounts.
Suretyships granted against payment of the leases of subsidiaries
are posted in the amount of the provided guarantee; the suretyships
for the Sava N otes are posted in the amount of the outstanding
notes;the suretyships and other unsecured guarantees granted
for financings, bonds, credit lines, commercial paper and other
financial instruments of subsidiaries and others are posted for the
reimbursement value of these notes at the balance sheet date.
The O ther unsecured guarantees include the amount of the risk
of withdrawal on sales of receivables with recourse. Receivables
sold with recourse are eliminated from the balance sheet; the risk
of withdrawal is reported under memorandum accounts and
disclosed in the notes.
Suretyships granted by others for enterprise debts, in particular
those granted by the Consortia participating in the High-Speed
Railway Project to guarantee the successful conclusion of work
and the advances posted on the liability side of the balance sheet
under advances, are not reported under memorandum accounts
but disclosed instead in the notes.
Commitments
The Group’s commitments are posted under memorandum accounts
in their amount at the balance sheet date. In particular, the supply
commitments for the High-Speed Railway Project include the amount
of supply commitments envisaged in the original agreements made
with Treno Alta Velocità – T.A.V. S.p.A., the amounts envisaged in
agreements for alterations during construction, and the respective
monetary adjustments.
If the amount of a commitment cannot be quantified,
the commitment is not posted under memorandum accounts
but disclosed instead in the notes.