Chrysler 2008 Annual Report Download - page 264

Fiat S.p.A. Statutory Financial Statements at 31 December 2008 263
Work in progress refers to activities carried out directly and is
recognised through measurement of the total contract income
on a percentage completion basis, with the incremental portion
of the work performed to date being recognised in the period.
The cost-to-cost method is used to determine the percentage
of completion of a contract (by dividing the costs incurred by
the total costs forecast for the whole construction).
Any losses expected to be incurred on contracts are fully
recognised in the income statement and as a reduction in
contract work in progress when they become known.
Any advances received from customers for services performed
are presented as a reduction in inventory. If the amount of
advances exceeds inventory, the excess is recognised as
Advances in the item Other payables.
Sales of receivables
Receivables sold in factoring transactions are derecognised if
and only if the risks and rewards relating to ownership have
been substantially transferred to the buyer. Receivables sold
with recourse and without recourse that do not satisfy this
condition remain on the balance sheet, even if they have been
legally sold; in such cases, a liability for the same amount is
recognised for advances received.
Assets held for sale
This item includes 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 (or disposal groups) are
measured at the lower of their carrying amount and fair value
less disposal costs.
Employee benefits
Post-employment plans
The company provides pension plans and other post-
employment plans to its employees. The pension plans for
which the company has an obligation under Italian law are
defined contribution plans, while the other post-employment
plans, for which the company generally has an obligation
under national collective bargaining agreements, are defined
benefit plans. Payments made by the Company for defined
contribution plans are recognised as a cost in the income
statement when incurred. Defined benefit plans are based on
the employee’s working life and on the salary or wage received
by the employee over a pre-determined period of service.
The scheme underlying the employee severance indemnity of
the Italian Group companies (“TFR”) was classified as a
defined benefit plan until 31 December 2006. Legislation
relating to this scheme and leading to this classification was
amended by Law 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.
The company’s obligation to fund defined benefit 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 the plan assets
at the end of the previous year is amortised over the average
remaining service lives of employees (the “corridor
approach”); the portion of actuarial gains and losses that does
not exceed this threshold is deferred.
Upon first-time adoption of IFRS, the Company elected to
recognise all cumulative actuarial gains and losses existing at
1 January 2004 (date of first-time adoption of IFRS by the Fiat
Group), despite having elected the corridor approach for
recognition of subsequent actuarial gains and losses.
The expense related to the reversal of discounting pension
obligations for defined benefit plans are recognised under
financial expense.
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.