Chrysler 2011 Annual Report Download - page 228

227
Consolidated
Financial Statements
at 31 December 2011
In order to test for impairment, significant receivables from corporate customers and receivables for which collectability is at risk are assessed individually,
while receivables from end customers or small business customers are grouped into homogeneous risk categories. A receivable is considered impaired
when there is objective evidence that the Group will be unable to collect all amounts the due specified in the contractual terms. Objective evidence may be
provided by the following factors: significant financial difficulties of the counterparty, the probability that the counterparty will be involved in an insolvency
procedure or will default on its instalment payments, the restructuring or renegotiation of open items with the counterparty, changes in the payment status
of one or more debtors included in a specific risk category and other contractual breaches. The calculation of the amount of the impairment loss is based
on the risk of default by the counterparty, which is determined by taking into account all the information available as to the customer’s solvency, the fair
value of any guarantees received for the receivable and the Group’s historical experience.
The maximum credit risk to which the Group is theoretically exposed at 31 December 2011 is represented by the carrying amounts of financial assets in the
financial statements and the nominal value of the guarantees provided on liabilities and commitments to third parties as discussed in Note 32.
Dealers and final customers for which the Group provides financing are subject to specific assessments of their creditworthiness under a detailed scoring
system; in addition to carrying out this screening process, the Group also obtains financial and non-financial guarantees for risks arising from credit granted
for the sale of cars, whose amount depends on the amount of the assets sold. These guarantees are further strengthened where possible by reserve of title
clauses on financed vehicle sales to the sales network and on vehicles assigned under finance leasing agreements.
Receivables for financing activities amounting to €3.968 million at 31 December 2011 contain balances totalling €5 million, which have been written down
on an individual basis. Of the remainder, balances totalling €70 million are past due by up to one month (€42 million at 31 December 2010 for Continuing
Operation), while balances totalling €62 million are past due by more than one month (€92 million at 31 December 2010). In the event of instalment
payments, even if only one instalment is overdue, the whole amount of the receivable is classified as such.
Trade receivables and Other receivables amounting to €4,335 million at 31 December 2011 contain balances totalling €78 million which have been written
down on an individual basis. Of the remainder, balances totalling €314 million are past due by up to one month (€164 million at 31 December 2010), while
balances totalling €313 million are past due by more than one month (€341 million at 31 December 2010). The increase over the previous year in the
amounts past due up to one month arises mainly from the consolidation of Chrysler.
Provided that Current securities and Cash and cash equivalents are measured at fair value, there was no exposure to sovereign debt securities at 31
December 2011 which might lead to significant repayment risk.
Liquidity risk
Liquidity risk arises if the Group is unable to obtain the funds needed to carry out its operations under economic conditions. Any actual or perceived
limitations on the Group’s liquidity may affect the ability of counterparties to do business with the Group or may require additional amounts of cash and
cash equivalents to be allocated as collateral for outstanding obligations.
The continuation of a difficult economic situation in the markets in which the Group operates and the uncertainties that characterise the financial markets,
necessitate giving special attention to the management of liquidity risk. In that sense measures taken to generate funds through operations and to maintain a
conservative level of available liquidity are an important factor for ensuring operational flexibility and addressing strategic challenges over the next few years.
The two main factors that determine the Group’s liquidity situation are on the one hand the funds generated by or used in operating and investing activities
and on the other the debt lending period and its renewal features or the liquidity of the funds employed and market terms and conditions.
The Group has adopted a series of policies and procedures whose purpose is to optimise the management of funds and to reduce liquidity risk as follows:
centralising the management of receipts and payments, where it may be economical in the context of the local civil, currency and fiscal regulations of the
countries in which the Group is present;
maintaining a conservative level of available liquidity;
diversifying the means by which funds are obtained and maintaining a continuous and active presence in the capital markets;
obtaining adequate credit lines;
monitoring future liquidity on the basis of business planning.