Chrysler 2007 Annual Report Download - page 110

Fiat Group Consolidated Financial Statements at December 31, 2007 - Notes 109
Ta x e s
Income taxes include all taxes based upon the taxable profits
of the Group. Taxes on income are recognised in the income
statement except to the extent that they relate to items
directly charged or credited to equity, in which case the
related income tax effect is recognised in equity. Provisions
for income taxes that could arise on the distribution of a
subsidiary’s undistributed profits are only made where there
is a current intention to distribute such profits. Other taxes
not based on income, such as property taxes and capital
taxes, are included in operating expenses. Deferred taxes are
provided using the full liability method. They are calculated
on all temporary differences between the tax base of an asset
or liability and the carrying values in the consolidated
financial statements, except for those arising from non tax-
deductible goodwill and for those related to investments in
subsidiaries where their reversal will not take place in the
foreseeable future. Deferred tax assets relating to the carry-
forward of unused tax losses and tax credits, as well as those
arising from temporary differences, are recognised to the
extent that it is probable that future profits will be available
against which they can be utilised. Current and deferred
income tax assets and liabilities are offset when the income
taxes are levied by the same taxation authority and where
there is a legally enforceable right of offset. Deferred tax
assets and liabilities are measured at the substantively
enacted tax rates in the respective jurisdictions in which the
Group operates that are expected to apply to taxable income
in the periods in which temporary differences will be
reversed.
Dividends
Dividends payable are reported as a movement in equity in the
period in which they are approved by stockholders.
Earnings per share
Basic earnings per share are calculated by dividing the Group’s
net profit attributable to the various classes of shares by the
weighted average number of shares outstanding during the
year. For diluted earnings per share, the weighted average
number of shares outstanding is adjusted assuming conversion
of all dilutive potential shares. Group net result is also
adjusted to reflect the net after-tax impact of conversion of
dilutive potential shares issued by Group’s subsidiaries.
Use of estimates
The preparation of financial statements and related disclosures
that conform to IFRS requires management to make
judgements, estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial
statements. The estimates and associated assumptions are
based on historical experience and other factors that are
considered to be relevant. Actual results could differ from
those estimates. Estimates and assumptions are reviewed
periodically and the effects of any changes are recognised in
the period in which the estimate is revised if the revision
affects only that period, or in the period of the revision and
future periods if the revision affects both current and future
periods.
The following are the critical judgements and the key
assumptions concerning the future, that management has
made in the process of applying the Group accounting policies
and that have the most significant effect on the amounts
recognised in the consolidated financial statements or that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year.
Allowance for doubtful accounts
The allowance for doubtful accounts reflects management
estimate of losses inherent in wholesale and retail credit
portfolio. The Group reserves for the expected credit losses
based on past experience with similar receivables, current and
historical past due amounts, dealer termination rates, write-
offs and collections, the careful monitoring of portfolio credit
quality and current and projected economic and market
conditions.
Recoverability of non-current assets (including goodwill)
Non-current assets include property, plant and equipment,
investment property, intangible assets (including goodwill),
investments and other financial assets. Management reviews
the carrying value of non-current assets held and used and