Chrysler 2007 Annual Report Download - page 257

Fiat S.p.A. Financial Statements at December 31, 2007 - Notes to the Financial Statements256
by independent actuaries using the projected unit credit
method. The portion of net actuarial gains and losses at the end
of the previous reporting period that exceeds the greater of 10%
of the present value of the defined benefit obligation and 10%
of the fair value of the plan assets at that date is deferred and
recognised over the remaining working lives of the employees
(the “corridor method”); the portion of actuarial gains and
losses that does not exceed this threshold is deferred.
In the context of IFRS first-time adoption, the company elected
to recognise all cumulative actuarial gains and losses at
January 1, 2004 (date of first-time adoption of IFRS by the Fiat
Group), although it has adopted the corridor method for those
arising subsequently.
The expense related to the reversal of discounting pension
obligations for defined benefit plans are reported separately as
part of the Group’s financial expense.
The liability for obligations arising under defined benefit plans
and due on termination of the employment contract represents
the present value of the obligation adjusted by actuarial gains
and loses deferred as the result of applying the corridor
approach and by past service costs for employee service in
prior periods that will be recognised in future years.
Other long-term benefits
The accounting treatment of other long-term benefits is the
same as that for post-employment benefit plans except for the
fact that actuarial gains and losses and past service costs are
fully recognised in the income statement in the year in which
they arise and the corridor method is not applied.
Equity compensation plans
The company provides additional benefits to certain members
of senior management and to certain employees through equity
compensation plans. Under IFRS 2 -
Share-based Payment ,
these plans are a component of employee remuneration whose
cost is measured by the fair value of the stock options at the
grant date recognised in the income statement on a straight-
line basis 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.
The company has applied the transitional provisions of IFRS 2
and as a result the Standard is applicable to all stock option
plans granted after November 7, 2002 but which had not yet
vested by January 1, 2005, the effective date of the Standard.
Detailed disclosures are also provided for plans granted before
that date.
The compensation component of the stock option plans based
on Fiat S.p.A. shares but regarding employees of other Group
companies is recognised as a capital contribution to the
subsidiaries for whom the employees beneficiaries of the stock
option plans work, in accordance with Interpretation IFRIC 11,
and as a result is recorded as an increase in the carrying
amount of the investment, with the offsetting credit being
recognized directly in equity.
Provisions
The company recognises provisions when it has a legal or
constructive obligation to third parties, when it is probable that
the settlement of the obligation will require the outflow of
resources and when a reliable estimate can be made for the
amount of the obligation.
Changes in estimates are recognised in the income statement
for 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 of any
subsequent sale are presented as movements in equity.
Dividends received and receivable
Dividends received and receivable from investments are
recognised in the income statement when the right to receive
the payment of this income is established and only if declared
from post-acquisition net income.