Chrysler 2009 Annual Report Download - page 144

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Allowance for doubtful accounts
The allowance for doubtful accounts reflects management estimate of losses inherent in wholesale and retail credit portfolio.
The allowance for doubtful debts is based on the Group’s estimate of the losses to be incurred, which derives from past
experience with similar receivables, current and historical past due amounts, dealer termination rates, write-offs and collections,
the careful monitoring of portfolio credit quality and current and projected economic and market conditions. Should the present
economic and financial crisis persist or even worsen, this could lead to a further deterioration in the financial situation of the
Group’s debtors compared to that already taken into consideration in calculating the allowances recognised in the financial
statements.
Allowance for obsolete and slow-moving inventory
The allowance for obsolete and slow-moving inventory reflects management’s estimate of the loss in value expected by the
Group, and has been determined on the basis of past experience and historical and expected future trends in the used vehicle
market. The present economic and financial crisis could cause a further deterioration in conditions in the used vehicle market
compared to that already taken into consideration in calculating the allowances recognised in the financial statements.
Recoverability of non-current assets (including goodwill)
Non-current assets include property, plant and equipment, intangible assets (including goodwill), investments and other financial
assets. Management reviews the carrying value of non-current assets held and used and that of assets to be disposed of when
events and circumstances warrant such a review. Management performs this review using estimates of future cash flows from
the use or disposal of the asset and suitable discount rate in order to calculate present value. If the carrying amount of a non-
current asset is considered impaired, the Group records an impairment charge for the amount by which the carrying amount of
the asset exceeds its estimated recoverable amount from use or disposal determined by reference to its most recent business
forecasts.
In view of the present economic and financial crisis, the Fiat Group has the following considerations in respect of its future
prospects:
In the current situation, when preparing figures for the consolidated financial statements for the year ended 31 December
2009 and more specifically for carrying out impairment testing of tangible and intangible assets, the various Sectors of the
Group have taken into consideration their expected performance for 2010, with assumptions and results consistent with
the statements made in the section Significant events subsequent to the year end and outlook. In addition, for subsequent
years they have prepared specific forecasts for business performance on a cautionary basis, considering the fact, therefore,
that the economical and financial environment and the market situation have undergone profound changes as the result of
the present crisis and taking into account different operating conditions arising from the strategic realignment with Chrysler
Group LLC. These forecasts did not indicate the need to recognise any significant impairment losses other than write-down
of certain investments in platforms and architectures in the Automobiles business.
In addition, should the assumptions underlying the forecast deteriorate further the following is noted:
The Group’s tangible assets and intangible assets with a finite useful life (which essentially regard development costs)
relate to recent models or products having a high technological content in line with the latest environmental laws and
regulations, which consequently renders them competitive in the present economic situation, especially in the more
mature economies in which particular attention is placed on the eco-sustainability of those types of products. As a result,
therefore, despite the fact that the automotive sector is one of the markets most affected by the present crisis in the
immediate term, it is considered highly probable that the life cycle of these products can be lengthened to extend over the
period of time involved in a slower economic recovery, in this way allowing the Group to achieve sufficient earnings flows
to cover the investments, albeit over a longer timescale.