Chrysler 2010 Annual Report Download - page 234

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A description of these follows:
Sales incentives - this provision relates to sales incentives that are offered on a contractual basis to the Group’s dealer networks, primarily on the basis
of that dealers will achieve a specific cumulative level of sales transactions during the calendar year. This provision is estimated based on the information
available regarding the sales made by the dealers during the calendar year. The provision also includes sales incentives such as cash rebates announced
by the Group and provided by dealers to customers, for which the dealers are reimbursed. The Group records this provision when it is probable that the
incentive will be provided and the Group’s inventory is sold to its dealers. The Group estimates this provision based on the expected use of these rebates
with respect to the volume of vehicles that has been sold to the dealers.
Legal proceedings and other disputes - this provision represents management’s best estimate of the liability to be recognised by the Group with regard to:
Legal proceedings arising in the ordinary course of business with dealers, customers, suppliers or regulators (such as contractual or patent disputes).
Legal proceedings involving claims with active and former employees.
Legal proceedings involving different tax authorities.
None of these provisions is individually significant. Each Group company recognises a provision for legal proceedings when it is deemed probable that
the proceedings will result in an outflow of resources. In determining their best estimate of the probable liability, each Group company evaluates their
legal proceedings on a case-by-case basis to estimate the probable losses that typically arise from events of the type giving rise to the liability. Their
estimate takes into account, as applicable, the views of legal counsel and other experts, the experience of the Group and others in similar situations and
the Group’s intentions with regard to further action in each proceeding. Fiat’s consolidated provision combines these individual provisions established by
each of the Group’s companies.
Commercial risks - this provision includes the amount of obligations arising in connection with the sale of products and services such as maintenance
contracts. An accrual is recorded when the expected costs to complete the services under these contracts exceed the revenues expected to be realised.
Environmental risks - This provision represents management’s best estimate of the Group’s probable environmental obligations. Amounts included in the
estimate comprise direct costs to be incurred by the Fiat Group pre-Demerger and the Fiat Industrial Group in connection with environmental obligations
associated with current or formerly owned facilities and sites. This provision also includes costs related to claims on environmental matters.
Indemnities - the provision for indemnities relates to contractual indemnities provided by the Group in connection with divestitures carried out in 2010
and prior years. These liabilities, that relate to Continuing Operations primarily arise from indemnities relating to contingent liabilities in existence at the
time of the sale, as well as those covering any possible breach of the representations and warranties provided in the contract and, in certain instances,
environmental or tax matters. These provisions were determined estimating the amount of the expected outflow of resources, taking into consideration
the relevant level of probability of occurrence.