Chrysler 2008 Annual Report Download - page 116

Fiat Group Consolidated Financial Statements at 31 December 2008 115
Assets held for sale
Assets held for sale include non-current assets (or assets
included in disposal groups) whose carrying amount will be
recovered principally through a sale transaction rather than
through continuing use. Assets held for sale are measured at
the lower of their carrying amount and fair value less disposal
costs.
Employee benefits
Pension plans
Employees of the Group participate in several defined benefit
and/or defined contribution pension plans in accordance with
local conditions and practices in the countries in which the
Group operates.
The Group's obligation to fund defined benefit pension plans
and the annual cost recognised in the income statement is
determined on an actuarial basis using the projected unit credit
method. The portion of net cumulative actuarial gains and
losses which exceeds the greater of 10% of the present value of
the defined benefit obligation and 10% of the fair value of plan
assets at the end of the previous year is amortised over the
average remaining service lives of the employees (the
“corridor approach”). In the context of IFRS First-time
Adoption, the Group elected to recognise all cumulative
actuarial gains and losses that existed at 1 January 2004, even
though it has decided to use the corridor approach for
subsequent actuarial gains and losses.
Past service costs are recognised on a straight-line basis over
the average period remaining until the benefits become vested.
All other costs and income arising from the measurement of
pension plan provisions are allocated to costs by function in
the income statement, except for interest cost on unfunded
defined benefit plans which is reported as part of financial
expenses.
The post-employment benefit obligation recognised in the
balance sheet represents the present value of the defined
benefit obligation as adjusted for unrecognised actuarial gains
and losses, arising from the application of the corridor method
and unrecognised past service cost, reduced by the fair value
of plan assets. Any net asset resulting from this calculation is
recognised at the lower of its amount and the total of any
cumulative unrecognised net actuarial losses and past service
cost, and the present value of any economic benefits available
in the form of refunds from the plan or reductions in future
contributions to the plan.
Costs arising from defined contribution plans are recognised
as an expense in the income statement as incurred.
Post-employment plans other than pensions
The Group provides certain post-employment defined benefit,
mainly health care plans. The method of accounting and the
frequency of valuations are similar to those used for defined
benefit pension plans.
The scheme underlying the employee severance indemnity
of the Italian Group companies (the TFR) was classified
as a defined benefit plan until 31 December 2006. The
legislation regarding this scheme and leading to this
classification was amended by Law no. 296 of 27 December
2006 (the “2007 Finance Law”) and subsequent decrees and
regulations issued in the first part of 2007. In view of these
changes, and with specific reference to those regarding
companies with at least 50 employees, this scheme only
continues to be classified as a defined benefit plan in the
Consolidated financial statements for those benefits accruing
up to 31 December 2006 (and not yet settled by the balance
sheet date), while after that date the scheme is classified as
a defined contribution plan.
Equity compensation plans
The Group provides additional benefits to certain members
of senior management and employees through equity
compensation plans (stock option plans). In accordance with
IFRS 2 –
Share-based Payment , these plans represent
a component of recipient remuneration. The compensation
expense, corresponding to the fair value of the options at the
grant date, is recognised in the income statement on
a straight-line basis over the period 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. In accordance with the
transitional provisions of IFRS 2, the Group applied the
Standard to all stock options granted after 7 November 2002
and not yet vested at 1 January 2005, the effective date of the
Standard. Detailed information is provided in respect of all
stock options granted on or prior to 7 November 2002.