Chrysler 2011 Annual Report Download - page 275

Fiat S.p.A.
Statutory
Financial
Statements
at 31 December
2011
Notes
274
Financial instruments
Presentation
Financial instruments held by the Company are classified in the financial statements as follows:
Non-current assets: investments, other financial assets, other non-current assets
Current assets: trade receivables, current financial receivables, other current receivables, cash and cash equivalents
Non-current liabilities: non-current debt, other non-current liabilities
Current liabilities: trade payables, current debt (including asset-backed financing), other debt
Cash and cash equivalents includes bank deposits, units in liquidity funds and other money market securities that are readily convertible
into cash and for which the risk of changes in value is insignificant.
Non-current debt includes liabilities related to financial guarantees. Financial guarantees are contracts where the Company undertakes
to make specific payments to a counterparty for losses incurred as a result of the failure of a borrower to meet its payment obligations
for a given debt instrument. The present value of any related fees receivable is recognized under other non-current financial assets.
Measurement
Investments in subsidiaries and associates are recognized at cost and adjusted for any impairment losses.
Any positive difference, arising on acquisition, between the purchase cost and fair value of net assets acquired in an investee company
is included in the carrying amount of the investment.
Investments in subsidiaries and associates are tested annually for impairment, or more frequently if evidence of impairment exists.
Where an impairment loss exists, it is recognized immediately through the income statement. If the Company’s share of losses of
the investee exceeds the carrying amount of the investment and if the Company has an obligation or intention to cover those losses,
the investment is written down to zero and a liability is recognized for the Company’s share of any additional losses. If an impairment
loss is subsequently reversed, the increase in carrying amount (up to a maximum of purchase cost) is recognized through the income
statement.
Investments in other companies, which consists of non-current financial assets that are not held for trading (i.e., available-for-sale
financial assets), are initially measured at fair value. Any subsequent gains or losses resulting from changes in fair value determined by
the market price are recognized directly in equity until the investment is sold or an impairment loss is recognized. If an investment is
sold, cumulative gains or losses previously recognized in equity are recycled through profit and loss. If an impairment loss is recognized
on the investment, any accumulated losses recognized in equity are recycled through profit and loss. Investments in companies for
which a market price is not available are measured at cost and adjusted for any impairment losses.
The Fiat Industrial ordinary shares allotted to Fiat S.p.A. as a result of the Demerger and allocated to servicing the stock option and
stock grant plans are linked to the liability recognized for share-based compensation (i.e., provisions for stock options and stock grants)
and, as such, are measured at fair value through profit or loss consistent with the valuation of the associated liability.
Other financial assets, which the Company intends to hold to maturity, are initially recognized on the settlement date at purchase cost
(considered representative of their fair value) which, with the exception of held-for-trading financial assets, is inclusive of transaction
costs. Subsequent measurement is at amortized cost using the effective interest method.
Other non-current assets, trade receivables, current financial receivables and other current receivables, excluding those based
on a derivative financial instrument, as well as all other unquoted financial assets whose fair value cannot be reliably determined,
are measured at amortized cost using the effective interest method, if they have a fixed term, or at cost, if they have no a fixed
term. Receivables with maturities of over one year which bear no interest or an interest rate significantly lower than market rates are
discounted using market rates.