Chrysler 2010 Annual Report Download - page 160

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initial measurement. In accordance with the transitional provisions of IFRS 2, the Group applied the Standard to all stock options
granted after 7 November 2002 and not yet vested at 1 January 2005, the effective date of the Standard. Detailed information
is provided in respect of all stock options granted on or prior to 7 November 2002.
Provisions
The Group records provisions when it has an obligation, legal or constructive, to a third party, when it is probable that an outflow
of Group resources will be required to satisfy the obligation and when a reliable estimate of the amount can be made.
Changes in estimates are reflected in the income statement in the period in which the change occurs.
Treasury shares
Treasury shares are presented as a deduction from equity. The original cost of treasury shares and the proceeds of any
subsequent sale are presented as movements in equity.
Revenue recognition
Revenue is recognised if it is probable that the economic benefits associated with a transaction will flow to the Group and the
revenue can be measured reliably. Revenues are stated net of discounts, allowances, settlement discounts and rebates, as well
as costs for sales incentive programs, determined on the basis of historical costs, country by country, and charged against profit
for the period in which the corresponding sales are recognised. The Group’s sales incentive programs include the granting of
retail financing at significant discount to market interest rates. The corresponding cost is recognised at the time of the initial sale.
Revenues from the sale of products are recognised when the risks and rewards of ownership of the goods are transferred to
the customer, the sales price is agreed or determinable and receipt of payment can be assumed: this corresponds generally to
the date when the vehicles are made available to non-group dealers, or the delivery date in the case of direct sales. New vehicle
sales with a buy-back commitment are not recognised at the time of delivery but are accounted for as operating leases when it
is probable that the vehicle will be bought back. More specifically, vehicles sold with a buy-back commitment are accounted for
as assets in Inventories if the sale originates from the Fiat Group Automobiles business (agreements with normally a short-term
buy-back commitment); and are accounted for in Property, plant and equipment, if the sale originates from the Commercial
Vehicles business (agreements with normally a long-term buy-back commitment). The difference between the carrying value
(corresponding to the manufacturing cost) and the estimated resale value (net of refurbishing costs) at the end of the buy-back
period is depreciated on a straight-line basis over the same period. The initial sale price received is recognised as an advance
payment (liability). The difference between the initial sale price and the buy-back price is recognised as rental revenue on a
straight-line basis over the term of the operating lease. Assets sold under a buy-back commitment that are initially recognised
in Property, plant and equipment are reclassified to Inventories at the end of the agreement term if they are held for sale. The
proceeds from the sale of such assets are recognised as Revenues.
Revenues from services and from construction contracts are recognised by reference to the stage of completion.
Revenues also include lease rentals and interest income from financial services companies.
Cost of sales
Cost of sales comprises the manufacturing cost of products and the acquisition cost of purchased merchandise which have
been sold. It includes all directly attributable material and production costs and all production overheads. These include the
depreciation of property, plant and equipment and the amortisation of intangible assets relating to production and write-downs
of inventories. Cost of sales also includes freight and insurance costs relating to deliveries to dealers and agency fees in the
case of direct sales.