Chrysler 2008 Annual Report Download - page 118

Fiat Group Consolidated Financial Statements at 31 December 2008 117
Research and development costs
This item includes research costs, development costs not
eligible for capitalisation and the amortisation of development
costs recognised as assets in accordance with IAS 38 (see
Notes 4 and 14).
Government grants
Government grants are recognised in the financial statements
when there is reasonable assurance that the Group company
concerned will comply with the conditions for receiving such
grants and that the grants themselves will be received.
Government grants are recognised as income over the periods
necessary to match them with the related costs which they are
intended to compensate.
Ta x e s
Income taxes include all taxes based upon the taxable profits
of the Group. Taxes on income are recognised in the income
statement except to the extent that they relate to items directly
charged or credited to equity, in which case the related income
tax effect is recognised in equity. Provisions for income taxes
that could arise on the distribution of a subsidiary’s
undistributed profits are only made where there is a current
intention to distribute such profits. Other taxes not based on
income, such as property taxes and capital taxes, are included
in operating expenses. Deferred taxes are provided using the
full liability method. They are calculated on all temporary
differences between the tax base of an asset or liability and the
carrying values in the Consolidated financial statements,
except for those arising from non tax-deductible goodwill and
for those related to investments in subsidiaries where their
reversal will not take place in the foreseeable future. Deferred
tax assets relating to the carry-forward of unused tax losses
and tax credits, as well as those arising from temporary
differences, are recognised to the extent that it is probable that
future profits will be available against which they can be
utilised. Current and deferred income tax assets and liabilities
are offset when the income taxes are levied by the same
taxation authority and where there is a legally enforceable
right of offset. Deferred tax assets and liabilities are measured
at the substantively enacted tax rates in the respective
jurisdictions in which the Group operates that are expected to
apply to taxable income in the periods in which temporary
differences will be reversed.
Dividends
Dividends payable are reported as a movement in equity in the
period in which they are approved by shareholders.
Earnings per share
Basic earnings per share are calculated by dividing the
Group’s net profit attributable to the various classes of shares
by the weighted average number of shares outstanding during
the year. For diluted earnings per share, the weighted average
number of shares outstanding is adjusted assuming
conversion of all dilutive potential shares. Group net
profit/(loss) is also adjusted to reflect the net after-tax impact
of conversion of dilutive potential shares issued by Group’s
subsidiaries.
Use of estimates
The preparation of financial statements and related disclosures
that conform to IFRS requires management to make
judgements, estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial
statements. The estimates and associated assumptions are
based on historical experience and other factors that are
considered to be relevant. Actual results could differ from
those estimates. Estimates and assumptions are reviewed
periodically and the effects of any changes are recognised
in the period in which the estimate is revised if the revision
affects only that period or in the period of the revision and
future periods if the revision affects both current and future
periods.
In this respect the situation caused by the present economic
and financial crisis has led to the need to make assumptions
regarding future performance which are characterised
by significant uncertainty; as a consequence, therefore,
it cannot be excluded that results may arise during the next