Chrysler 2008 Annual Report Download - page 266

Fiat S.p.A. Statutory Financial Statements at 31 December 2008 265
Deferred tax assets and liabilities are determined on the basis
of all the temporary differences between the carrying amount
of an asset or liability in the balance sheet and its
corresponding tax basis. Deferred tax assets resulting from
unused tax losses and temporary differences are recognised to
the extent that it is probable that future taxable profit will be
available against which they can be utilised. Current and
deferred income taxes and liabilities are offset when there is a
legally enforceable right to offset. Deferred tax assets and
liabilities are measured at the substantively enacted tax rates
that are expected to apply to taxable income in the periods in
which temporary differences will be reversed.
Fiat S.p.A. and almost all its Italian subsidiaries have elected to
take part in the domestic tax consolidation programme
pursuant to Articles 117/129 of the Consolidated Income Tax Act
(T.U.I.R.); the election was made for a three year period
beginning in 2004. The election was renewed in 2007 for at
least another three year period.
Fiat S.p.A. acts as the consolidating company in this
programme and calculates a single taxable base for the group
of companies taking part, thereby enabling benefits to be
realised from the offsetting of taxable income and tax losses in
a single tax return. Each company participating in the
consolidation transfers its taxable income or tax loss to the
consolidating company. Fiat S.p.A. recognises receivables from
companies contributing taxable incomes, corresponding to the
amount of IRES (corporate income tax) paid on its behalf. In
the case of a company bringing a tax loss into the
consolidation, Fiat S.p.A. recognises a payable to that company
for the amount of the loss actually set off at a group level.
Dividends payable
Dividends payable are recognised as changes in shareholders’
equity in the period in which they are approved by
shareholders.
Earnings per share
Earnings per share are calculated exclusively with reference to
the Group’s net profit.
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 year which
differ from estimates, and which therefore might require
adjustments, even significant, to be made to the carrying
amount of the items in question, which at the present moment
can clearly neither be estimated nor predicted. The line item
most affected by these situations of uncertainty relates to
investments in subsidiaries and associates classified under
non-current assets, where estimates are used for the
determination of impairment losses and reversals of
impairment losses.
No particular or significant issues have arisen, however, in
relation to estimates used for the recognition of percentage
completion of contract work in progress, employee benefits,
taxes or provisions also taking into consideration their level of
materiality.
In relation to investments in subsidiaries and associates, and in
consideration of its relative weighting, the use of estimates has
the greatest influence on the carrying value recognised for the
investment in Fiat Group Automobiles S.p.A., which was
transferred from Fiat Partecipazioni S.p.A., through a partial
spin-off, consistently with the book value of the investment in
Fiat Partecipazioni itself. In 2006 and 2007, reversals totalling
€2.7 billion were recognised while €5.4 billion of impairment
losses had been recognised in prior periods. The valuation