Chrysler 2007 Annual Report Download - page 103

Fiat Group Consolidated Financial Statements at December 31, 2007 - Notes102
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
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
components, engines, and production systems) are recognised
as an asset if and only if both of the following conditions are
met: that development costs can be measured reliably and that
technical feasibility of the product, volumes and pricing
support the view that the development expenditure will
generate future economic benefits. Capitalised development
costs include all direct and indirect costs that could be directly
attributable to the development process.
Capitalised development costs are amortised on a systematic
basis from the start of production of the related product over
the product‘s estimated life, as follows:
N° of years
Cars 4 - 5
Trucks and Buses 8
Agricultural and Construction Equipment 5
Engines 8 - 10
Components and Production Systems 3 - 5