Chrysler 2011 Annual Report Download - page 160

159
Consolidated
Financial Statements
at 31 December 2011
Finally, in January 2012 Fiat announced that Chrysler had achieved the third and final Performance Event (the “Ecological Event”)
contemplated by the Chrysler Group Amended and Restated LLC Operating Agreement, increasing Fiat’s ownership interest in
Chrysler Group to 58.5%. The assignment of these additional ownership interests did not require Fiat to pay any cash consideration.
The increase in the membership interest will be recognised in the consolidated financial statements of Fiat in 2012.
At the date of this Annual report Fiat holds the following options and rights:
VEBA Trust Call Option: The VEBA Trust has granted Fiat a call option on a portion of the Class A membership interests held by the
VEBA Trust. This call option is exercisable from 1 July 2012 to 30 June 2016, provided that it covers 40% of the current interests
issued to the VEBA Trust and may be exercised for no more than 8% of such membership interests in any six month period. The
determination of the exercise price of this option is the same described for the Alternative Call Option and for the Incremental Equity
Call Option.
The Equity Recapture Agreement: which provides Fiat the rights to the economic benefit associated with the membership interests
held by the VEBA Trust once the VEBA trust receives proceeds, including certain distributions, in excess of $4.25 billion plus 9% per
annum from January 1, 2010 (“Threshold Amount”). Once the VEBA Trust receives the Threshold Amount, any additional proceeds
payable to the VEBA Trust for the Chrysler membership interest and any membership interest retained by the VEBA Trust are to
be transferred to Fiat for no further consideration. In addition, Fiat has the right to acquire VEBA Trust’s entire membership interest
in Chrysler at a price equivalent to the specified Threshold amount, less any proceeds already received by the VEBA Trust on that
interest (see the Note 32).
In accordance with paragraph AG81 of IAS 39 – Financial Instruments: recognition and measurement, both of these have been
recognised in the Consolidated financial statements at cost, since (i) the variability in the range of reasonable fair value estimates is
significant for these instruments and (ii) the probabilities that are used to weight the various estimates in the range of fair values cannot
be reasonably established and used in estimating fair value.
Accounting effect of the acquisition of control
The acquisition of the control of Chrysler represents a business combination achieved in stages and falls under the scope of IFRS 3 -
Business Combinations. The accounting treatment for the business combination is as follows (effects in dollars translated into Euros
using the exchange rate of 1.4385 at the Acquisition date):
the previously held 30% ownership interest in Chrysler initially recognised at zero by Fiat was remeasured at fair value at the date
on which control was acquired and the resulting gain of €1,729 million ($2,487 million) has been recognised in profit or loss under
Unusual income/(expense). For the purpose of establishing the fair value of Chrysler in order to calculate that gain, given that no
active market price for Chrysler shares was available, in accordance with IFRS 3 it was deemed reasonable to use the equity value
of $8,290 million (€5,763 million) for Chrysler implied in the price agreed between Fiat and the U.S. Treasury in early June 2011 for
exercising the call option on the U.S. Treasury’s 6.031% ownership interest (on a fully-diluted basis) in Chrysler. This value does not
differ significantly from that obtained from the exercise price of the Incremental Equity Call Option;