Chrysler 2008 Annual Report Download - page 143

The recoverable amount of the Ferrari and Comau cash-generating units and of the respective goodwill is determined on the basis
of the following assumptions:
2008 2007
Terminal value Discount rate Terminal value Discount rate
growth rate before taxes growth rate before taxes
Ferrari 2% 10.5% 2% 10.2%
Production Systems 2% 9.6% 2% 10.4%
The recoverable amount of the cash generating unit to which the Ferrari Sector goodwill relates is significantly higher than its
carrying amount; in addition, the exclusivity of the business, its historical profitability and its future earnings prospects indicate
that this carrying amount will continue to be recoverable, even in the event of economic and market conditions which remain
difficult and maybe become much worse.
In the Comau Sector, this approach led to the recognition in 2008 and in 2007 of impairment losses of €12 million and €1 million,
respectively, for goodwill allocated to the System cash generating unit. This loss was recognised as Other unusual income
(expenses) in the income statement. A sensitivity analysis was carried out on the residual goodwill, which is mainly allocated
to the Pico cash-generating unit, but no matters arose to indicate that this may be significantly impaired.
The results obtained for the other Sectors and related sensitivity analyses also confirmed the absence of significant impairment
losses.
Finally, it is appropriate to note that the estimates and budget data to which the above mentioned parameters have been applied
are those determined by management on the basis of past performance and expectations of developments in the markets in which
the Group operates. In this respect the negative actual data for trends in demand in the various sectors in the last quarter of 2008
together with pessimistic forecasts for performance in 2009 have led management to reconsider the expected rates of growth
of the revenues and margins incorporated in the business plan drawn up in previous years and to revise the plan using a more
cautious basis. This means that the sales objectives included in the most recent plan will be achieved more slowly, although
without causing situations to arise in which the carrying amount of goodwill may be significantly impaired. However, estimating
the recoverable amount of cash generating units requires discretion and the use of estimates by management. The Group cannot
guarantee that there will be no goodwill impairment in future periods. In fact, various factors connected to the current challenging
market environment could require a reassessment of [reduction in] the value of goodwill. Circumstances and events which could
potentially cause further impairment losses are constantly monitored by the Group.
Development costs
The amortisation of development costs and impairment losses are reported in the income statement as Research and development
costs and Restructuring costs. These charges were all reported as Research and development costs in 2007.
Development costs recognised as assets are attributed to cash generating units and are tested for impairment together with the
related tangible fixed assets, using the discounted cash flow method in determining their recoverable amount.
Fiat Group Consolidated Financial Statements at 31 December 2008142