Chrysler 2010 Annual Report Download - page 150

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SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
The 2010 consolidated financial statements have been prepared in accordance with the International Financial Reporting
Standards (the “IFRS”) issued by the International Accounting Standards Board (“IASB”) and adopted by the European Union,
and with the provisions implementing article 9 of Legislative Decree no. 38/2005. The designation “IFRS” also includes all valid
International Accounting Standards (“IAS”), as well as all interpretations of the International Financial Reporting Interpretations
Committee (“IFRIC”), formerly the Standing Interpretations Committee (“SIC”).
The financial statements are prepared under the historical cost convention, modified as required for the valuation of certain
financial instruments, as well as on the going concern assumption. In this respect, despite operating in a continuingly difficult
economic and financial environment, the Group’s assessment is that no material uncertainties (as defined in paragraph 25 of
IAS 1) exist about its ability to continue as a going concern, in view also of the measures already undertaken by the Group to
adapt to the changed levels of demand and the Group’s industrial and financial flexibility.
Format of the financial statements
The Group presents an income statement using a classification based on the function of expenses (otherwise known as the “cost
of sales” method), rather than based on their nature, as this is believed to provide information that is more relevant. The format
selected is that used for managing the business and for management reporting purposes and is consistent with international
practice in the automotive sector. In this income statement, in which the classification of expenses is based on their function,
the Trading profit/(loss) is reported specifically as part of Operating profit/(loss) and separate from the income and expense
resulting from the non-recurring operations of the business, such as Gains (losses) on the sale of investments, Restructuring
costs and any Other income (expenses) defined as unusual and of a similar nature to these items. By doing this, it is believed
that the Group’s actual performance from normal trading operations may be measured in a better way, while disclosing specific
details of unusual income and expenses. Consequently, the definition of unusual transaction adopted by the Group differs from
that provided in the Consob Communication of 27 July, 2006, under which unusual and abnormal transactions are those which,
because of their significance or importance, the nature of the parties involved, the object of the transaction or the methods of
determining the transfer price or the timing of the event (close to the year end), may give rise to doubts regarding the accuracy/
completeness of the information in the financial statements, conflicts of interest, the safeguarding of an entity’s assets or the
protection of non-controlling interests.
For the Statement of financial position, a mixed format has been selected to present current and non-current assets and
liabilities, as permitted by IAS 1. In more detail, both companies carrying out industrial activities and those carrying out financial
activities are consolidated in the Group’s financial statements. The investment portfolios of financial services companies are
included in current assets, as the investments will be realised in their normal operating cycle. Financial services companies,
though, obtain funds only partially from the market: the remaining are obtained from Fiat S.p.A. through the Group’s treasury
companies (included in industrial companies), which lend funds both to industrial Group companies and to financial services
companies as the need arises. This financial service structure within the Group means that any attempt to separate current and
non-current debt in the consolidated Statement of financial position cannot be meaningful. Suitable disclosure of the due dates
of liabilities is moreover provided in the notes.
The Statement of Cash Flows is presented using the indirect method.
In connection with the requirements of the Consob Resolution No. 15519 of 27 July 2006 as to the format of the financial
statements, specific supplementary Income Statement, Statement of Financial Position and Statement of Cash Flows formats
have been added for related party transactions so as not to compromise an overall reading of the statements.