Chrysler 2006 Annual Report Download - page 49

Fiat Group Consolidated Financial Statements at December 31, 2006 -Notes 95
Dividends received from these investments are included
in Other income (expenses) from investments.
Transactions eliminated on consolidation
All significant intragroup balances and transactions and
any unrealised gains and losses arising from intragroup
transactions are eliminated in preparing the consolidated
financial statements. Unrealised gains and losses arising from
transactions with associates and jointly controlled entities are
eliminated to the extent of the Group’s interest in those
entities.
Foreign currency transactions
Transactions in foreign currencies are recorded at the
foreign exchange rate prevailing at the date of the transaction.
Monetary assets and liabilities denominated in foreign
currencies at the balance sheet date are translated at the
exchange rate prevailing at that date. Exchange differences
arising on the settlement of monetary items or on reporting
monetary items at rates different from those at which they
were initially recorded during the period or in previous
financial statements, are recognised in the income statement.
Consolidation of foreign entities
All assets and liabilities of foreign consolidated companies
with a functional currency other than the Euro are translated
using the exchange rates in effect at the balance sheet date.
Income and expenses are translated at the average exchange
rate for the period. Translation differences resulting from the
application of this method are classified as equity until the
disposal of the investment. Average rates of exchange are used
to translate the cash flows of foreign subsidiaries in preparing
the consolidated statement of cash flows.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are recorded in the relevant functional
currency of the foreign entity and are translated using the
period end exchange rate.
In the context of IFRS First-time Adoption, the cumulative
translation difference arising from the consolidation of foreign
operations was set at nil, as permitted by IFRS 1; gains or
losses on subsequent disposal of any foreign operation only
partially from the market: the remaining are obtained from Fiat
S.p.A. 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.
Suitable disclosure on the due dates of liabilities is moreover
provided in the notes.
The Statement of Cash Flows is presented 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 an overall reading
of the statements.
Basis of consolidation
Subsidiaries
Subsidiaries are enterprises controlled by the Group, as
defined in IAS 27 – Consolidated and Separate Financial
Statements.Control exists when the Group has the power,
directly or indirectly,to govern the financial and operating
policies of an enterprise so as to obtain benefits from its
activities. The financial statements of subsidiaries are included
in the consolidated financial statements from the date that
control commences until the date that control ceases. The
equity and net result attributable to minority stockholders’
interests are shown separately in the consolidated balance
sheet and income statement, respectively. When losses in a
consolidated subsidiary pertaining to the minority exceed
the minority interest in the subsidiary’s equity, the excess
is charged against the Group’s interest, unless the minority
stockholders have a binding obligation to reimburse the losses
and are able to make an additional investment to cover the
losses, in which case the excess is recorded as an asset in the
consolidated financial statements. If no such obligation exists,
should profits be realised in the future, the minority interests’
share of those profits is attributed to the Group, up to the
Fiat Group Consolidated Financial Statements at December 31, 2006 -Notes 94
amount necessary to recover the losses previously absorbed
by the Group.
Subsidiaries that are either dormant or generate a negligible
volume of business, are not consolidated. Their impact on the
Group’s assets, liabilities, financial position and earnings is
immaterial.
Jointly controlled entities
Jointly controlled entities are enterprises over whose activities
the Group has joint control, as defined in IAS 31 – Interests in
Joint Ventures.The consolidated financial statements include
the Group’sshare of the earnings of jointly controlled entities
using the equity method, from the date that joint control
commences until the date that joint control ceases.
Associates
Associates are enterprises over which the Group has
significant influence, but no control or joint control, over
the financial and operating policies, as defined in IAS 28
–Investments in Associates.The consolidated financial
statements include the Group’s share of the earnings of
associates using the equity method, from the date that
significant influence commences until the date that significant
influence ceases. When the Group’s share of losses of an
associate, if any,exceeds the carrying amount of the associate
in the Group’s balance sheet, the carrying amount is reduced
to nil and recognition of further losses is discontinued except
to the extent that the Group has incurred obligations in respect
of the associate.
Investments in other companies
Investments in other companies that are available-for-sale
financial assets are measured at fair value, when this can be
reliably determined. Gains or losses arising from changes in
fair value are recognised directly in equity until the assets are
sold or are impaired, when the cumulative gains and losses
previously recognised in equity are recognised in the income
statement of the period.
Investments in other companies for which fair value is
not available are stated at cost less any impairment losses.
include accumulated translation differences arising after
January 1, 2004.
Intangible assets
Goodwill
In the case of acquisitions of businesses, the acquired identifiable
assets, liabilities and contingent liabilities are recorded at fair
value at the date of acquisition. Any excess of the cost of the
business combination over the Group’s interest in the fair value
of those assets and liabilities is classified as goodwill and
recorded in the financial statement as an intangible asset. If
this difference is negative (negative goodwill), it is recognised
in the income statement at the time of acquisition.
In the absence of a specific Standard or Interpretation on
the matter, when the Group acquires a minority interest in
controlled companies the excess of the acquisition cost over
the carrying value of the assets and liabilities acquired is
recognised as goodwill (the “Parent entity extension method”).
Goodwill is not amortised, but is tested for impairment
annually or more frequently if events or changes in
circumstances indicate that it might be impaired. After initial
recognition, goodwill is measured at cost less any accumulated
impairment losses.
On disposal of part or whole of a business which was
previously acquired and which gave rise to the recognition
of goodwill, the remaining amount of the related goodwill is
included in the determination of the gain or loss on disposal.
In the context of IFRS First-time Adoption, the Group elected
not to apply IFRS 3 – Business Combinations retrospectively
to the business combinations that occurred before January 1,
2004; as a consequence, goodwill arising on acquisitions
before the date of transition to IFRS has been retained at the
previous Italian GAAP amounts, subject to impairment testing
at that date.
Development costs
Development costs for vehicle project production (cars, trucks,
buses, agricultural and construction equipment, related