Chrysler 2010 Annual Report Download - page 316

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The company’s obligation to fund defined benefit plans and the annual cost recognized in the income statement is determined
on an actuarial basis using the projected unit credit method. The portion of net cumulative actuarial gains and losses which
exceeds the greater of 10% of the present value of the defined benefit obligation and 10% of the fair value of the plan assets at
the end of the previous year is amortized over the average remaining service lives of employees (the “corridor approach”); the
portion of actuarial gains and losses that does not exceed this threshold is deferred.
Upon first-time adoption of IFRS, the Company elected to recognize all cumulative actuarial gains and losses existing at
1 January 2004 (date of first-time adoption of IFRS by the Fiat Group), despite having elected the corridor approach for
recognition of subsequent actuarial gains and losses.
The expense related to the reversal of discounting pension obligations for defined benefit plans are recognized under financial
expense.
The post-employment benefit obligation recognized in the statement of financial position represents the present value of the
defined benefit obligation as adjusted for unrecognized actuarial gains and losses, arising from the application of the corridor
method and unrecognized past service cost.
Other long-term employee benefits
The accounting treatment for other long-term benefits is the same as that for post-employment benefit plans except for the fact
that actuarial gains and losses and past service costs are fully recognized in the income statement in the year in which they arise
and the corridor method is not applied.
Equity-based compensation
The Company provides additional benefits to certain senior managers and employees in the form of equity participation schemes
(stock options and stock grants). In accordance with IFRS 2 – Share-based Payment, such plans constitute a component of the
recipient’s compensation and the cost, based on the fair value of the instrument at the grant date, is recognized in the income
statement on a straight-line basis over the period from the grant date to the vesting date, and a balancing entry recognized
directly in equity. The initial measurement is not affected by any subsequent changes in fair value. In accordance with the
transitional provisions of IFRS 2, the Company 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.
The compensation component from stock option plans based on Fiat S.p.A. shares relating to employees of other Group
companies is recognized as a capital contribution to the subsidiaries which employ beneficiaries of the stock option plans,
in accordance with IFRIC 11 and, as a result, is recorded as an increase in the carrying amount of the investment, with the
offsetting credit being recognized directly in equity.
Provisions
The Company recognizes provisions when it has a legal or constructive obligation to third parties, when it is probable that an
outflow of 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.
Own shares
Own shares are recognized as a deduction from equity. The original cost of own shares, proceeds of any subsequent sale and
other changes are presented as movements in equity.