Chrysler 2009 Annual Report Download - page 138

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Financial liabilities refer to debt, which includes asset-backed financing, and other financial liabilities (which include derivative
financial instruments stated at fair value as liabilities), trade payables and other payables.
Measurement
Investments in unconsolidated companies classified as non-current financial assets are accounted for as described in the
section Basis of consolidation.
Non-current financial assets other than investments, as well as current financial assets and financial liabilities, are accounted for
in accordance with IAS 39 – Financial Instruments: Recognition and Measurement.
Current financial assets and held-to-maturity securities are recognised on the basis of the settlement date and, on initial
recognition, are measured at acquisition cost, including transaction costs.
Subsequent to initial recognition, available-for-sale and held for trading financial assets are measured at fair value. When market
prices are not available, the fair value of available-for-sale financial assets is measured using appropriate valuation techniques
e.g. discounted cash flow analysis based on market information available at the balance sheet date.
Gains and losses on available-for-sale financial assets are recognised directly in equity until the financial asset is disposed
or is determined to be impaired; when the asset is disposed of, the cumulative gains or losses, including those previously
recognised in equity, are reclassified into the income statement for the period; when the asset is impaired, accumulated
losses are recognised in the income statement. Gains and losses arising from changes in fair value of held for trading financial
instruments are included in the income statement for the period.
Loans and receivables which are not held by the Group for trading (loans and receivables originating in the course of business),
held-to-maturity securities and all financial assets for which published price quotations in an active market are not available
and whose fair value cannot be determined reliably, are measured, to the extent that they have a fixed term, at amortised cost,
using the effective interest method. When the financial assets do not have a fixed term, they are measured at acquisition cost.
Receivables with maturities of over one year which bear no interest or an interest rate significantly lower than market rates are
discounted using market rates.
Assessments are made regularly as to whether there is any objective evidence that a financial asset or group of assets may be
impaired. If any such evidence exists, an impairment loss is included in the income statement for the period.
Except for derivative instruments, financial liabilities are measured at amortised cost using the effective interest method.
Financial assets and liabilities hedged by derivative instruments are measured in accordance with hedge accounting principles
applicable to fair value hedges: gains and losses arising from remeasurement at fair value, due to changes in relevant hedged
risk, are recognised in the income statement and are offset by the effective portion of the loss or gain arising from remeasurement
at fair value of the hedging instrument.
Derivative financial instruments
Derivative financial instruments are used for hedging purposes, in order to reduce currency, interest rate and market price risks.
In accordance with IAS 39, derivative financial instruments qualify for hedge accounting only when at the inception of the hedge
there is formal designation and documentation of the hedging relationship, the hedge is expected to be highly effective, its
effectiveness can be reliably measured and it is highly effective throughout the financial reporting periods for which the hedge
is designated.
All derivative financial instruments are measured in accordance with IAS 39 at fair value.