Chrysler 2008 Annual Report Download - page 126

Fiat Group Consolidated Financial Statements at 31 December 2008 125
The Group’s policy permits derivatives to be used only for
managing the exposure to fluctuations in exchange and
interest rates connected with future cash flows and assets and
liabilities, and not for speculative purposes.
The Group utilises derivative financial instruments designated
as fair value hedges, mainly to hedge:
the currency risk on financial instruments denominated in
foreign currency;
the interest rate risk on fixed rate loans and borrowings.
The instruments used for these hedges are mainly currency
swaps, forward contracts, interest rate swaps and combined
interest rate and currency financial instruments.
The Group uses derivative financial instruments as cash flow
hedges for the purpose of pre-determining:
the exchange rate at which forecasted transactions
denominated in foreign currencies will be accounted for;
the interest paid on borrowings, both to match the fixed
interest received on loans (customer financing activity), and to
achieve a pre-defined mix of floating versus fixed rate funding
structured loans.
The exchange rate exposure on forecasted commercial flows
is hedged by currency swaps, forward contracts and currency
options. Interest rate exposures are usually hedged by interest
rate swaps and, in limited cases, by forward rate agreements.
Counterparties to these agreements are major and diverse
financial institutions.
Information on the fair value of derivative financial instruments
held at the balance sheet date is provided in Note 21.
Additional qualitative information on the financial risks to
which the Group is exposed is provided in Note 33.
Scope of consolidation
The Consolidated financial statements of the Group as
of 31 December 2008 include Fiat S.p.A. and 428 consolidated
subsidiaries in which Fiat S.p.A., directly or indirectly,
has a majority of the voting rights, over which it exercises
control, or from which it is able to derive benefit by virtue
of its power to govern corporate financial and operating
policies.
An additional 10 subsidiaries were consolidated at
31 December 2008 compared to 31 December 2007.
Excluded from consolidation are 76 subsidiaries that are
either dormant or generate a negligible volume of business:
their proportion of the Group’s assets, liabilities, financial
position and earnings is immaterial. In particular,
50 such subsidiaries are accounted for using the cost method;
and represent in aggregate 0.2 percent of Group revenues,
0 percent of shareholders’ equity and 0.1 percent of total
assets.
Interests in jointly controlled entities (67 companies, including
29 entities of Fiat Group Automobiles Financial Services
(“FAFS”) now FGA Capital, are accounted for using the equity
method, except for Fiat-GM Powertrain Polska S.p. Z.o.o.,
accounted for using proportionate consolidation. Condensed
financial information relating to the Group’s pro-rata interest in
the above entity is as follows:
At At
31 December 31 December
(€ millions) 2008 2007
Non-current assets 106 151
Current assets 67 154
Total assets 173 305
Debt 1–
Other liabilities 59 147
(€ millions) 2008 2007
Net revenues 220 238
Net profit/(loss) 35 22