Chrysler 2007 Annual Report Download - page 113

Fiat Group Consolidated Financial Statements at December 31, 2007 - Notes112
On July 5, 2007 IFRIC issued the interpretation IFRIC 14 –
IAS
19
– The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction
. The interpretation is
mandatory from January 1, 2008. The interpretation provides
general guidance on how to assess the limit in IAS 19 –
Employee Benefits on the amount of the surplus that can be
recognised as an asset. It also explains how the pension
asset or liability may be affected when there is a statutory or
contractual minimum funding requirement. At the balance
sheet date, this interpretation had not yet been endorsed by
the European Union.
On September 6, 2007 the IASB issued a revised version of
IAS 1 -
Presentation of Financial Statements that is effective
for annual periods beginning on or after 1 January 2009. The
revised standard requires an entity to present changes in its
equity resulting from transactions with owners in a
statement of changes in equity. All non-owner changes
(meaning changes in comprehensive income) are required to
be presented either in a single statement of comprehensive
income or in two statements (a separate income statement
and a statement of comprehensive income). Transactions
with non-owners may not be presented in the statement of
changes in equity. This standard had not yet been endorsed
by the European Union at the balance sheet date.
The following standards and interpretations have also been
issued, but are not applicable to the Group:
■ IFRIC 12 – Service Concession Arrangements (effective from
January 1, 2008 but not yet endorsed by the European Union);
■ IFRIC 13 – Customer Loyalty Programmes (effective from
January 1, 2009 but not yet endorsed by the European Union).
Risk management
Credit risk
The Group’s credit concentration risk differs in relation to the
activities carried out by the individual sectors and various
sales markets in which the Group operates; in all cases,
however, the risk is mitigated by the large number of
counterparties and customers.
Considered from a global point of view, however, there is a
concentration of credit risk in trade receivables and
receivables from financing activities, in particular dealer
financing and finance leases in the European Union market
for the Fiat Group Automobiles and Trucks and Commercial
Vehicles Sectors, and in North America for the Agricultural
and Construction Equipment Sector.
Financial assets are recognised in the balance sheet net of
write-downs for the risk that counterparties will be unable to
fulfil their contractual obligations, determined on the basis of
the available information as to the creditworthiness of the
customer and historical data.
Liquidity risk
The Group is exposed to funding risk if there is difficulty
in obtaining finance for operations at any given point in
time.
The cash flows, funding requirements and liquidity of Group
companies are monitored on a centralised basis, under the
control of the Group Treasury. The aim of this centralised
system is to optimise the efficiency and effectiveness of the
management of the Group’s capital resources.
In addition, Group Treasury has the committed credit
facilities described in Note 28 as a hedge of liquidity risk.
Interest rate risk and currency risk
As a multinational group that has operations throughout the
world, the Group is exposed to market risks from fluctuations
in foreign currency exchange and interest rates.
The exposure to foreign currency risk arises both in
connection with the geographical distribution of the Group’s
industrial activities compared to the markets in which it sell
products, and in relation to the use of external borrowing
denominated in foreign currencies.
The exposure to interest rate risk arises from the need to
fund industrial and financial operating activities and the
necessity to deploy surplus funds. Changes in market