Chrysler 2010 Annual Report Download - page 315

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NOTES FIAT S.P.A.
STATUTORY
FINANCIAL
STATEMENTS AT
31 DECEMBER
2010
Inventory
Inventory consists of contract work in progress related, in particular, to long-term construction contracts between Fiat S.p.A.
and Treno Alta Velocità – T.A.V. S.p.A. (merged into Rete Ferroviaria Italiana S.p.A. from 31 December 2010) under which Fiat
S.p.A. as general contractor coordinates, organizes and manages the work.
Work in progress refers to activities carried out directly and is recognized through measurement of the total contract income
on a percentage completion basis, with the incremental portion of the work performed to date being recognized in the period.
The cost-to-cost method is used to determine the percentage of completion of a contract (by dividing the costs incurred by the
total costs forecast for the whole construction).
Any losses expected to be incurred on contracts are fully recognized in the income statement and as a reduction in contract
work in progress when they become known.
Any advances received from customers for services performed are presented as a reduction in inventory. If the value of
advances received exceeds inventory, any excess is recognized as advances under other payables.
Sales of receivables
Receivables sold in factoring transactions are derecognized if and only if the risks and rewards relating to ownership have been
substantially transferred to the buyer. Receivables sold with recourse and without recourse that do not satisfy this condition
remain in the statement of financial position, even if they have been legally sold; in such cases, a liability for the same amount
is recognized for advances received.
Assets held for sale
This item includes non-current assets (or assets included in disposal groups) whose carrying amount will be recovered principally
through a sale transaction rather than through continuing use. Assets held for sale (or disposal groups) are measured at the
lower of their carrying amount and fair value less disposal costs.
Employee benefits
Post-employment benefit plans
The company provides pension plans and other post-employment benefit plans to its employees. The pension plans for which
the company has an obligation under Italian law are defined contribution plans, while the other post-employment benefit
plans, for which the company generally has an obligation under national collective bargaining agreements, are defined benefit
plans. Payments made by the Company for defined contribution plans are recognized as a cost in the income statement when
incurred. Defined benefit plans are based on the employee’s working life and on the salary or wage received by the employee
over a pre-determined period of service.
The scheme underlying the employee severance indemnity of the Italian Group companies (Trattamento di Fine Rapporto
or “TFR”) was classified as a defined benefit plan until 31 December 2006. Legislation relating to this scheme and leading to
this classification was amended by Law 296 of 27 December 2006 (the “2007 Finance Law”) and subsequent decrees and
regulations issued in the first part of 2007. In view of these changes, and with specific reference to those regarding companies
with at least 50 employees, this scheme only continues to be classified as a defined benefit plan in the consolidated financial
statements for those benefits accruing up to 31 December 2006 (and not yet settled by the balance sheet date), while after that
date the scheme is classified as a defined contribution plan.