Chrysler 2007 Annual Report Download - page 254

Fiat S.p.A. Financial Statements at December 31, 2007 - Notes to the Financial Statements 253
Financial instruments
Presentation
Financial instruments held by the company are presented in
the balance sheet as described in the following:
■Non-current assets: Investments, Other financial assets,
Other non-current assets.
■Current assets: Trade receivables, Current financial
receivables, Other current receivables, Cash and cash
equivalents.
■Non-current liabilities: Non-current financial payables, Other
non-current liabilities.
■Current liabilities: Trade payables, Current financial payables
(including payables for advances on the sale of receivables),
Other payables.
The item “Cash and cash equivalents” consists of cash and
deposits with banks, units with liquidity funds and other highly
traded securities that are readily convertible to cash and which
are subject to an insignificant risk of changes in value.
The liability relating to financial guarantee contracts is
included in Non-current financial payables. The term financial
guarantee contracts refers to contracts under which the
company guarantees to make specific payments to reimburse
the holder for a loss it incurs because a specified debtor fails
to make payment when due in accordance with the terms of a
debt instrument. The present value of the related receivable for
any outstanding commissions is classified in Non-current
financial assets.
Measurement
Investments in subsidiaries and associated companies are
stated at cost adjusted for any impairment losses.
The excess on acquisition of the purchase cost and the share
acquired by the company of the investee company’s net assets
measured at fair value is, accordingly, included in the carrying
value of the investment.
Investments in subsidiaries and associated companies are
tested for impairment annually and if necessary more often. If
there is any evidence that these investments have been
impaired, the impairment loss is recognised directly in the
income statement. If the company’s share of losses of the
investee exceeds the carrying amount of the investment and if
the company has an obligation or intends to respond for these
losses, the company’s interest is reduced to zero and a liability
is recognised for its share of the additional losses. If the
impairment loss subsequently no longer exists it is reversed
and the reversal is recognised in the income statement up to
the limit of the cost of the investment.
Investments in other companies, comprising non-current
financial assets that are not held for trading (available-for-sale
financial assets), are initially measured at fair value. Any
subsequent profits and losses resulting from changes in fair
value, arising from quoted prices, are recognised directly in
equity until the investment is sold or is impaired; when the
asset is disposed of, the cumulative gains or losses, including
those previously recognised in equity, are reclassified into the
income statement for the period; when the asset is impaired,
accumulated losses are recognised in the income statement.
Investments in other minor companies for which a market price
is not available are measured at cost, adjusted for any
impairment losses.
Other financial assets for which the company has the intent to
hold to maturity are recognised on the trade date and are
measured at purchase price (being representative of fair value)
on initial recognition in the balance sheet, inclusive of
transaction costs other than in respect of assets held for
trading. These assets are subsequently measured at amortised
cost using the effective interest method.
Other non-current assets, Trade receivables, Current financial
receivables and Other current receivables, excluding assets
deriving from derivative financial instruments and all financial
assets for which quotations on an active market are not
available and whose fair value cannot be reliably determined
are measured at amortised cost using the effective interest
method if they have a pre-determined maturity. If financial
assets do not have a pre-determined maturity they are