Chrysler 2011 Annual Report Download - page 151

Notes
150 Consolidated
Financial
Statements
at 31 December
2011
Taxes
Income taxes include all taxes based upon the taxable profits of the Group. Taxes on income are recognised in the income statement
except to the extent that they relate to items directly charged or credited to other comprehensive income, in which case the related
income tax effect is recognised in other comprehensive income. Provisions for income taxes that could arise on the distribution of a
subsidiary’s undistributed profits are only made where there is a current intention to distribute such profits. Other taxes not based on
income, such as property taxes and capital taxes, are included in operating expenses. Deferred taxes are provided using the full liability
method. They are calculated on all temporary differences between the tax base of an asset or liability and the carrying amounts in the
consolidated financial statements, except for those arising from non-tax-deductible goodwill and for those related to investments in
subsidiaries where reversal will not take place in the foreseeable future. Deferred tax assets relating to the carry-forward of unused
tax losses and tax credits, as well as those arising from temporary differences, are recognised to the extent that it is probable that
future profits will be available against which they can be utilised. Current and deferred income tax assets and liabilities are offset when
the income taxes are levied by the same taxation authority and where there is a legally enforceable right of offset. Deferred tax assets
and liabilities are measured at the substantively enacted tax rates in the respective jurisdictions in which the Group operates that are
expected to apply to taxable income in the periods in which temporary differences reverse or expire.
Dividends
Dividends payable by the Group are reported as a movement in equity in the period in which they are approved by Shareholders in their
annual general meeting.
Earnings per share
Basic earnings per share are calculated by dividing the profit/(loss) attributable to owners of the parent entity assignable to the various
classes of shares by the weighted average number of shares outstanding during the year. For diluted earnings per share, the weighted
average number of shares outstanding is adjusted assuming conversion of all dilutive potential shares.
Use of estimates
The consolidated financial statements are prepared in accordance with IFRS which require the use of estimates, judgements and
assumptions that affect the carrying amount of assets and liabilities, the disclosures relating to contingent assets and liabilities and the
amounts of income and expense reported for the period.
The estimates and associated assumptions are based on elements that are known when the financial statements are prepared, on
historical experience and on any other factors that are considered to be relevant.
In this respect, the situation caused by the continuing difficulties of the economic and financial environment, in particular in the
Eurozone, led to the need to make assumptions regarding future performance which are characterised by significant uncertainty; as a
consequence, therefore, it cannot be excluded that results may arise in the future which differ from estimates, and which therefore might
require adjustments, even significant, to be made to the carrying amount of the items in question, which at the present moment can
clearly neither be estimated nor predicted. The main items affected by these situations of uncertainty are non-current assets (tangible
and intangible assets), deferred tax assets, provision for employee benefits, and allowances for inventories (including vehicles sold
under buy-back agreement).
The estimates and underlying assumptions are reviewed periodically and continuously by the Group. If the items considered in this
process perform differently, then the actual results could differ from the estimates, which would accordingly require adjustment. The
effects of any changes in estimate are recognised in profit or loss in the period in which the adjustment is made if it only affects that
period, or in the period of the adjustment and future periods if it affects both current and future periods.
The following are the critical measurement processes and key assumptions used by the Group in applying IFRSs which may have
significant effects on the amounts recognised in the consolidated financial statements or for which there is a risk that a significant
difference may arise in respect to the carrying amounts of assets and liabilities in the future.