Chrysler 2009 Annual Report Download - page 287

FIAT S.P.A.
STATUTORY
FINANCIAL
STATEMENTS AT
31 DECEMBER
2009
NOTES
286
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 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 result.
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 directly in profit and loss 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.
The item “Investments in subsidiaries and associates” was most impacted by estimates used to determine the carrying amounts
of Fiat Group Automobiles S.p.A. (FGA) and Iveco S.p.A. due to their relative weighting. During 2009, these two subsidiaries
distributed dividends of฀€700 million (FGA) and ฀€560 million (Iveco) in relation to profit for prior years. The valuation approach
applied for the preparation of the 2009 financial statements was based on the estimate of value in use of the investments. The
estimates were based on expected performance for 2010, whose assumptions and results are consistent with the statements
made in the Report on Operations under “Subsequent Events and Outlook”. Conservative profit estimates were made for
subsequent periods accordingly. For the purposes of valuation, these annual profit estimates were then reduced - using
adjustment factors that increase over the projected time horizon (as estimates become more difficult) - as a further measure
of prudence, given the continued uncertainty as to the duration of the current economic crisis and timing of a return to normal
market conditions. A theoretical terminal value (based on an ultimate disposal) was estimated assuming a perpetual growth rate