Chrysler 2009 Annual Report Download - page 283

FIAT S.P.A.
STATUTORY
FINANCIAL
STATEMENTS AT
31 DECEMBER
2009
NOTES
282
respond for these losses, the company’s interest is reduced to zero and a liability is recognised for its share of the additional
losses. If the impairment loss subsequently no longer exists it is reversed and the reversal is recognised in the income statement
up to the limit of the cost of the investment.
Investments in other companies, comprising non-current financial assets that are not held for trading (available-for-sale
financial assets), are initially measured at fair value. Any subsequent profits and losses resulting from changes in fair value,
correlated to their market price, are recognised directly in equity until the investment is sold or is impaired; when the asset
is disposed of, the cumulative gains or losses, including those previously recognised in equity, are reclassified in the income
statement for the period; when the asset is impaired, accumulated losses are recognised in the income statement. Investments
in other smaller companies for which a market price is not available are measured at cost, adjusted for any impairment losses.
Other financial assets which the company has the intention to hold to maturity are recognised on the basis of the settlement
date and, on initial recognition, are measured at acquisition cost (being representative of fair value) on initial recognition in the
statement of financial position, inclusive of transaction costs other than in respect of assets held for trading. These assets are
subsequently measured at amortised cost using the effective interest method.
Other non-current assets, trade receivables, current financial receivables and other current receivables, excluding
assets deriving from derivative financial instruments 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 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 for the purpose of verifying if there is objective evidence that a financial asset, separately or
within a group of assets, may have been impaired. If any such evidence exists, an impairment loss is included in the income
statement for the period.
Non-current financial payables, other non-current liabilities, trade payables, current financial payables and other
payables are measured on initial recognition at fair value (normally represented by the cost of the transaction), including any
additional transaction costs.
Financial liabilities are subsequently measured at amortised cost using the effective interest method, except for derivative
financial instruments and liabilities for financial guarantee contracts. Financial liabilities hedged by derivative instruments are
measured in accordance with hedge accounting principles applicable to fair value hedges. Gains and losses arising from
measurement at fair value, caused by fluctuations in interest rates, are recognised in the income statement and are offset by
the effective portion of the gain or loss arising from remeasurement at fair value of the hedging instrument.
Liabilities for financial guarantee contracts are measured at the higher of the estimate of the contingent liability (determined in
accordance with IAS 37 - Provisions, Contingent Liabilities and Contingent Assets) and the amount initially recognised less any
amount released to income over time.
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.