Chrysler 2010 Annual Report Download - page 318

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Use of estimates
The preparation of financial statements and related disclosures that conform to IFRS requires management to make judgments,
estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements. The estimates and associated assumptions are based on historical experience
and other factors that are considered to be relevant. Actual results could differ from those estimates. Estimates and assumptions
are reviewed periodically and the effects of any changes are recognized directly in profit and loss in the period in which the
estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects
both current and future periods.
In this respect, the situation caused by the recent economic and financial crisis and the consequent difficulties experienced in
many markets has led to the need to make assumptions regarding future performance which are characterized by significant
uncertainty. As a consequence, therefore, it cannot be excluded that results may arise during the year which differ from
estimates, and which may subsequently require adjustments, even significant, to the carrying amount of the item(s) in question,
which obviously at present can neither be estimated nor predicted. The line item most impacted by the use of estimates is
“investments in subsidiaries and associates” included under non-current assets, where estimates are used for the determination
of impairment losses and reversals of impairment losses. No particular or significant issues have arisen, however, in relation
to estimates used for the recognition of percentage completion of contract work in progress, employee benefits, taxes or
provisions also taking into consideration their level of materiality.
The line item “investments in subsidiaries and associates” was primarily influenced by estimates used in determination of the
carrying amount of Fiat Group Automobiles S.p.A. (FGA), given the relative weighting of that investment. For the 2010 financial
statements, the investment has been measured on the basis of its estimated “value in use”. Those estimates took into account
expected performance for 2011, and the assumptions and resulting output are consistent with statements made in the Report
on Operations under “Subsequent Events and Outlook”, in addition to the Fiat Group 2010-2014 Business Plan presented to
the financial community on 21 April 2010. For valuation purposes, annual profit estimates were then reduced – using adjustment
factors that increase over the projected time horizon (as estimates become more difficult) – as a further measure of prudence,
given the continued uncertainty as to the timing of a return to normal market conditions. A theoretical terminal value (based
on an ultimate disposal) was estimated assuming a perpetual growth rate of zero. The present value was calculated using a
discount rate of 14.5%, considered prudent for the industry sector and geographic markets in which this subsidiary operates.
The estimates and underlying assumptions provided reasonable support for the determination that no writedowns or reversals
in value were necessary for 2010.
Accounting standards, amendments and interpretations effective from 1 January 2010 but not applicable
to the Company
The following amendments, improvements and interpretations, effective from 1 January 2010, relate to issues that were not
applicable to the Company at the date of these financial statements, but which may have an impact on the accounting treatment
of future transactions or arrangements:
IFRS 3 (2008) – Business combinations.
IAS 27 (2008) – Consolidated and Separate Financial Statements.
Improvement to IFRS 5 (2009) – Non-current Assets Held for Sale and Discontinued Operations.
Amendment to IAS 28 – Investments in Associates and IAS 31 – Interests in Joint Ventures consequential to the amendment
to IAS 27.
Improvements to IAS/IFRS (2009).