Chrysler 2010 Annual Report Download - page 202

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In this respect during the second quarter of 2010 Chrysler published its consolidated financial statements for the period from 10 June 2009 (the date on
which Chrysler commenced operations) to 31 December 2009, while its interim financial information for the first nine months of 2010 was published during
the fourth quarter of 2010; both reports have been prepared in accordance with accounting principles generally accepted in the United States of America
(“US GAAP”). The following tables reconcile the loss and members’ deficit as published by Chrysler and the corresponding balances prepared in accordance
with International Financial Reporting Standards (“IFRS”), as adopted by the Fiat Group, for the above-mentioned periods:
01/01- At 30 September 10/06- At 31 December
30/09/2010 (*) 2010 (*) 31/12/2009 2009
Members Members
(€ million) Profit/(loss) Interest Profit/(loss) Interest
Prepared in accordance with US GAAP (344) (2,816) (2,614) (2,936)
Reconciling items on:
Development costs 358 495 132 133
“VEBA Note” and “VEBA Trust’s Contribution” (22) 1,131 1,416 1,756
Pension funds and other post-retirement benefits - 662 - 634
Other minor adjustments 21 24 4 3
Prepared in accordance with IFRS 13 (504) (1,062) (410)
(*) Unaudited.
Main reconciling items refer to:
Development costs: under US GAAP, all development costs are expensed as incurred. Under IFRS, development costs for vehicle project production
are capitalised as intangible assets if the development costs can be measured reliably and the technical and economic feasibility of the product, volumes
and pricing support the view that the development expenditure will generate future economic benefits. Capitalised development costs include direct
and indirect costs that could be directly attributable to the development process, incurred by Chrysler starting from 10 June 2009. These costs are
subsequently amortised on a straight-line basis over the production cycle.
VEBA Note and VEBA Trust’s Contribution: the reconciling item includes differences in the accounting treatment of the financial liability (“VEBA Note”) of
Chrysler to the United Auto Workers’ Retiree Medical Benefits Trust (the “VEBA Trust”) that results from the settlement of the cumulative post-employment
benefits due to certain retirees of the previous Chrysler (“Old CarCo LLC”, now in liquidation). The reconciling item also includes the different valuation of
the VEBA Trust’s contribution to Chrysler equity. Under US GAAP, the settlement of the other post employment benefit obligation was recognised on 1
January 2010, as those accounting principles do not recognise partial settlements. Under IFRS, a partial settlement of the other post employment benefits
obligation was recognised on 10 June 2009. The reconciliation adjustment results from differences in fair value measurement of the VEBA note payable
and equity consideration resulting from different settlement dates on which the valuation was performed. The effect on equity resulting from the different
accounting treatment of the VEBA Note will reduce substantially over time, over the term of the Note, with a corresponding entry to profit or loss for
the period.
Pension funds and other post-retirement benefits: under US GAAP, Chrysler immediately recognises actuarial gains and losses for other post employment
benefits plans which are short-term in nature and for which its obligation is capped. For uncapped plans, Chrysler’s US GAAP accounting policy is to utilise
the 10% corridor approach. Unrealised actuarial gains and losses are recognised in accumulated other comprehensive loss, a separate component of
equity. Under IFRS, the company also applies the corridor approach. However under IFRS, the cumulative actuarial gains and losses unrealised are not
recognised in the balance sheet. Therefore, a reconciliation adjustment is reflected to reverse unrealised actuarial net losses from equity and decrease
the provision.
For completeness, it is noted that having reached one of the predetermined so called Performance Events envisaged in the Chrysler-Fiat strategic alliance
agreements, on 10 January 2011 Fiat received without consideration an additional interest of 5% in Chrysler, and therefore its total holding in Chrysler is
currently equal to 25%. Further details about the Fiat Group’s rights relating to the investment in Chrysler may be found in Note 29.
Non-current financial receivables
At 31 December 2010, non-current financial receivables of €40 million (€44 million at 31 December 2009) wholly classified as Discontinued Operations
were pledged as security for loans.