Chrysler 2007 Annual Report Download - page 108

Fiat Group Consolidated Financial Statements at December 31, 2007 - Notes 107
the defined benefit obligation and 10% of the fair value of plan
assets at the end of the previous year is amortised over the
average remaining service lives of the employees (the
“corridor approach”). In the context of IFRS First-time
Adoption, the Group elected to recognise all cumulative
actuarial gains and losses that existed at January 1, 2004, even
though it has decided to use the corridor approach for
subsequent actuarial gains and losses.
Past service costs are recognised on a straight-line basis
over the average period remaining until the benefits become
vested. All other costs and income arising from the
measurement of pension plan provisions are allocated to
costs by function in the income statement, except for interest
cost on unfunded defined benefit plans which is reported as
part of financial expenses.
The post-employment benefit obligation recognised in the
balance sheet represents the present value of the defined
benefit obligation as adjusted for unrecognised actuarial
gains and losses, arising from the application of the corridor
method and unrecognised past service cost, reduced by the
fair value of plan assets. Any net asset resulting from this
calculation is recognised at the lower of its amount and the
total of any cumulative unrecognised net actuarial losses and
past service cost, and the present value of any economic
benefits available in the form of refunds from the plan or
reductions in future contributions to the plan.
Costs arising from defined contribution plans are recognised
as an expense in the income statement as incurred.
Post-employment plans other than pensions
The Group provides certain post-employment defined
benefit, mainly healthcare plans. The method of accounting
and the frequency of valuations are similar to those used for
defined benefit pension plans.
The scheme underlying the employee severance indemnity of
the Italian Group companies (the TFR) was classified as a
defined benefit plan until December 31, 2006. The legislation
regarding this scheme and leading to this classification was
amended by Law no. 296 of December 27, 2006 (the “2007
Finance Law”) and subsequent decrees and regulations
issued in the first part of 2007. In view of these changes, and
with specific reference to those regarding companies with at
least 50 employees, this scheme only continues to be
classified as a defined benefit plan in the consolidated
financial statements for those benefits accruing up to
December 31, 2006 (and not yet settled by the balance sheet
date), while after that date the scheme is classified as a
defined contribution plan. The effects of the introduction of
the new legislation from an accounting standpoint are
discussed in Note 26.
Equity compensation plans
The Group provides additional benefits to certain members
of senior management and employees through equity
compensation plans (stock option plans). In accordance with
IFRS 2 –
Share-based Payment , these plans represent a
component of recipient remuneration. The compensation
expense, corresponding to the fair value of the options at the
grant date, is recognised in the income statement on a
straight-line basis over the period from the grant date to the
vesting date, with the offsetting credit recognised directly in
equity. Any subsequent changes to fair value do not have any
effect on the initial measurement. In accordance with the
transitional provisions of IFRS 2, the Group applied the
Standard to all stock options granted after November 7, 2002
and not yet vested at January 1, 2005, the effective date of
the Standard. Detailed information is provided in respect of
all stock options granted on or prior to November 7, 2002.
Provisions
The Group records provisions when it has an obligation,
legal or constructive, to a third party, when it is probable
that an outflow of Group resources will be required to satisfy
the obligation and when a reliable estimate of the amount
can be made.
Changes in estimates are reflected in the income statement
in the period in which the change occurs.
Treasury shares
Treasury shares are presented as a deduction from equity.
The original cost of treasury shares and the proceeds