Chrysler 2008 Annual Report Download - page 186

The provision for other risks represents the amounts set aside by the individual companies of the Group principally in connection
with contractual and commercial risks and disputes. The more significant balances of these provisions are as follows:
(€ millions) At 31 December 2008 At 31 December 2007
Sales Incentives 939 873
Legal proceedings and other disputes 729 740
Commercial risks 782 922
Environmental risks 77 72
Indemnities 61 58
Other reserves for risk and charges 567 568
Total Other risks 3,155 3,233
A description of these follows:
 Sales Incentives - these provisions relate to sales incentives that are offered on a contractual basis to the Group’s dealer
networks, primarily on the basis of the dealers achieving a specific cumulative level of revenue transactions during the calendar
year. This provision is estimated based on the information available regarding the sales made by the dealers during the calendar
year. The provision also includes sales incentives such as cash rebates announced by the Group and provided by dealers to
customers, for which the dealers are reimbursed. The Group records these provisions when it is probable that the incentive will be
provided and the Group’s inventory is sold to its dealers. The Group estimates these provisions based on the expected use of these
rebates with respect to the volume of vehicles that has been sold to the dealers.
 Legal proceedings and other disputes - this provision represents management’s best estimate of the liability to be recognised by
the Group with regard to:
− Legal proceedings arising in the ordinary course of business with dealers, customers, suppliers or regulators (such as contractual
or patent disputes).
− Legal proceedings involving claims with active and former employees.
− Legal proceedings involving different tax authorities.
None of these provisions is individually significant. Each Group company recognises a provision for legal proceedings when it is
deemed probable that the proceedings will result in an outflow of resources. In determining their best estimate of the probable
liability, each Group company evaluates their legal proceedings on a case-by-case basis to estimate the probable losses that
typically arise from events of the type giving rise to the liability. Their estimate takes into account, as applicable, the views of legal
counsel and other experts, the experience of the Group and others in similar situations and the Group’s intentions with regard to
further action in each proceeding. Fiat’s consolidated provision aggregates these individual provisions established by each of the
Group’s companies.
 Commercial risks - this provision includes the amount of obligations arising in connection with the sale of products and services
such as extended warranty agreements and maintenance contracts. An accrual is recorded when the expected costs to complete
the services under these contracts exceed the revenues expected to be realised. This provision also includes management’s best
estimate of the costs that are expected to be incurred in connection with product defects that could result in a larger recall of
vehicles. This provision for risks is developed through an assessment of reported damages or returns on a case-by-case basis.
Fiat Group Consolidated Financial Statements at 31 December 2008 185