Chrysler 2006 Annual Report Download - page 124

Fiat S.p.A. Financial Statements at December 31, 2006 - Notes to the Financial Statements 245Fiat S.p.A. Financial Statements at December 31, 2006 - Notes to the Financial Statements244
Group’s financial statements. The investment portfolios of
financial services companies are included in current assets
in the Consolidated Balance Sheet, as the investments will
be realised in their normal operating cycle. Financial services
companies, though, obtain funds only partially from the
market: the remaining are obtained through the Group’s
treasury companies (included in industrial companies), which
lend funds both to industrial Group companies and to financial
services companies as the need arises. This financial service
structure within the Group means that any attempt to separate
current and non-current debt in the Consolidated Balance
Sheet cannot be meaningful. This has no effect on the
presentation of the liabilities of Fiat S.p.A.
The statement of cash flows has been prepared using the
indirect method.
In connection with the requirements of the Consob Resolution
No. 15519 of July 27, 2006 as to the format of the financial
statements, specific supplementary Income Statement and
Balance Sheet formats have been added for related party
transactions, so as not to compromise the overall reading
of the statements.
Intangible assets
Purchased and internally-generated intangible assets are
recognised as assets in accordance with IAS 38 - Intangible
Assets,where it is probable that the use of the asset will
generate future economic benefits and where the cost of the
asset can be determined reliably.
Intangible assets with finite useful lives are measured at
purchase or manufacturing cost, net of amortisation charged
on a straight-line basis over their estimated useful lives and
net of any impairment losses.
Property,plant and equipment
Cost
Property, plant and equipment is measured at purchase or
manufacturing cost, net of accumulated depreciation and any
impairment losses, and is not revalued.
Subsequent expenditures are capitalised only if they increase
the future economic benefits embodied in the asset to which
they relate. All other expenditures are expensed as incurred.
Assets are depreciated using the policies and rates described
below.
Lease arrangements in which the lessor maintains substantially
all the risks and rewards incidental to the ownership of an
asset are classified as operating leases. Lease payments under
an operating lease are recognised as an expense on a straight-
line basis over the lease term.
Depreciation
Depreciation is charged on a straight-line basis over the
estimated useful lives of assets as follows:
Annual depreciation rate
Buildings 3%
Plant 10%
Furniture 12%
Fixtures 20%
Vehicles 25%
Land is not depreciated.
Impairment of assets
The company reviews at least annually the recoverability of
the carrying amount of intangible assets, property, plant and
equipment and investments in subsidiaries and associates, in
order to determine whether there is any indication that those
assets have suffered an impairment loss. If any such indication
exists, the carrying amount of an asset is written down to its
recoverable amount.
The recoverable amount of an asset is the higher of fair value
less costs to sell and its value in use.
In particular,in assessing whether investments in subsidiaries
and associated companies have been impaired, their
recoverable amount has been taken as their value in use, as
the investments are not listed and a market value (fair value
less costs to sell) cannot be reliably measured. The value in
use of an investment is determined by estimating the present
value of the estimated cash flows expected to arise from the
results of the investment and from the estimated value of its
ultimate disposal, in line with the requirements of paragraph
33 of IAS 28.
Principal activities
Fiat S.p.A. (the “Company”) is a corporation organised under
the laws of the Republic of Italy and is the Parent Company
of the Fiat Group, holding investments, either directly or
indirectly through subholdings, in the capital of the parent
companies of business Sectors in which the Fiat Group
operates.
The head office of the company is in Turin, Italy.
The financial statements of Fiat S.p.A. are prepared in euros
which is the currency of the economic environment in which
the company operates.
The Balance Sheet and Income Statement are presented
in euros, while the Statement of Cash Flows, the Statement
of Changes in Stockholders’ Equity, the Statement of Total
Recognised Income and Expenses and the amounts stated
in the Notes are presented in thousands of euros, unless
otherwise stated.
As the Parent Company,Fiat S.p.A. has additionally prepared
the consolidated financial statements of the Fiat Group at
December 31, 2006.
Significant accounting policies
Basis of preparation
The 2006 financial statements are the separate financial
statements of the Parent Company,Fiat S.p.A., and have
been prepared in accordance with the International Financial
Reporting Standards (“IFRS”) issued by the International
Accounting Standards Board (“IASB”) and adopted by the
European Union. The designation “IFRS” also includes all
the revised International Accounting Standards (“IAS”) and
all the interpretations of the International Financial Reporting
Interpretations Committee (“IFRIC”), previously known as
the Standing Interpretations Committee (“SIC”).
In compliance with European Regulation no. 1606 of July 19,
2002, starting from 2005 the Fiat Group has adopted the
International Financial Reporting Standards (“IFRS”) issued by
the International Accounting Standards Board (“IASB”) for the
preparation of its consolidated financial statements. On the
basis of national legislation implementing that Regulation,
the annual statutory accounts of the Parent Company Fiat
S.p.A. as of December 31, 2006 have been prepared for the first
time also using those accounting standards. As a consequence
the Parent Company Fiat S.p.A. is presenting its financial
statements for 2006 and its comparative figures for the prior
year in accordance with IFRS. The accounting principles
applied are the same as those used in the preparation of the
Company’s Balance Sheets at January 1, 2005 and
December 31, 2005 and its 2005 Income Statement in
accordance with IFRS; these statements are provided in the
Appendix attached to these Notes, to which reference should
be made. The Appendix provides reconciliations of the
Company’s equity and Income Statement reported under its
previous accounting principles (Italian accounting principles)
and IFRS, together with Notes, as required by IFRS 1 – First-
time adoption of IFRS.
Certain reclassifications have been made with respect to the
figures published in the Appendix to the 2006 First-half Report.
The comparative figures for the previous period were
consequently reclassified. These reclassifications have no
effect on the net result or stockholders’ equity.
The financial statements have been prepared on a historical
cost basis, modified as required for measuring certain financial
instruments.
Format of the financial statements
Fiat S.p.A. presents an Income Statement using a classification
based on the nature of its revenues and expenses given the
type of business it performs. The Fiat Group presents a
Consolidated Income Statement using a classification based
on function, as this is believed to be more representative of
the format selected for managing the business sectors and
for internal reporting purposes and is coherent with
international practice in the automotive sector.
Fiat S.p.A. has elected to present current and non-current
assets and liabilities as separate classifications on the face
of the Balance Sheet. A mixed format has been selected by
the Fiat Group for the Consolidated Balance Sheet, as
permitted by IAS 1, presenting only current and non-current
assets separately. This decision has been taken in view of the
fact that both companies carrying out industrial activities and
those carrying out financial activities are consolidated in the
Notes to the Financial Statements