Chrysler 2008 Annual Report Download - page 109

Notes to the Consolidated
Financial Statements
Fiat Group Consolidated Financial Statements at 31 December 2008108
Principal activities
Fiat S.p.A. is a corporation organised under the laws of the
Republic of Italy. Fiat S.p.A. and its subsidiaries (the “Group”)
operate in approximately 50 countries. The Group is engaged
principally in the manufacture and sale of automobiles,
agricultural and construction equipment and commercial
vehicles. It also manufactures other products and systems,
principally engines, transmission systems, automotive-related
components, metallurgical products and production systems.
In addition, it is involved in certain other sectors, including
publishing and communications, which represent a small
portion of its activities. The head office of the Group is located
in Turin, Italy.
The Consolidated financial statements are presented in euros,
the Group’s functional currency.
Significant accounting policies
Basis of preparation
The 2008 Consolidated financial statements have been
prepared in accordance with the International Financial
Reporting Standards (the “IFRS”) issued by the International
Accounting Standards Board (“IASB”) and adopted by the
European Union, and with the provisions implementing article
9 of Legislative Decree no. 38/2005. The designation “IFRS”
also includes all valid International Accounting Standards
(“IAS”), as well as all interpretations of the International
Financial Reporting Interpretations Committee (“IFRIC”),
formerly the Standing Interpretations Committee (“SIC”).
The financial statements are prepared under the historical cost
convention, modified as required for the valuation of certain
financial instruments, as well as on the going concern
assumption. In this respect, despite operating in a difficult
economic and financial environment, the Group’s assessment
is that no material uncertainties (as defined in paragraph 25
of IAS 1) exist about its ability to continue as a going concern,
in view also of the measures already identified by the Group
to adapt to the changed levels of demand and the Group’s
industrial and financial flexibility.
Format of the financial statements
The Group presents an income statement using a classification
based on the function of expenses (otherwise known as the
“cost of sales” method), rather than based on their nature,
as this is believed to provide information that is more relevant.
The format selected is that used for managing the business
and for management reporting purposes and is consistent with
international practice in the automotive sector.
In this income statement, in which the classification of
expenses is based on their function, the Trading profit is
reported specifically as part of Operating profit/(loss) and
separate from the income and expense resulting from the non-
recurring operations of the business, such as gains and losses
on the sale of investments, restructuring costs and any other
unusual income or expense of a different nature. By doing this,
it is believed that the Group’s actual performance from normal
trading operations may be measured in a better way, while
disclosing specific details of unusual income and expenses.
Consequently, the definition of unusual transaction adopted
by the Group differs from that provided in the Consob
Communication of 28 July, 2006, under which unusual and
abnormal transactions are those which, because of their
significance or importance, the nature of the parties involved,
the object of the transaction, the methods of determining the
transfer price or the timing of the event (close to the year end),
may give rise to doubts regarding the accuracy/completeness
of the information in the financial statements, conflicts of
interest, the safeguarding of an entity’s assets or the protection
of minority interests.
For the balance sheet, a mixed format has been selected to
present current and non-current assets and liabilities, as
permitted by IAS 1. In more detail, both companies carrying
out industrial activities and those carrying out financial
activities are consolidated in the Group’s financial statements.
The investment portfolios of financial services companies are
included in current assets, as the investments will be realised
in their normal operating cycle. Financial services companies,
though, obtain funds only partially from the market: the
remaining are obtained from Fiat S.p.A. through the Group’s
treasury companies (included in industrial companies), which