Chrysler 2012 Annual Report Download - page 140

139
Consolidated
Financial Statements
at 31 December 2012
Cost of sales
Cost of sales comprises the manufacturing cost of products and the acquisition cost of purchased merchandise which have been
sold. It includes all directly attributable material and production costs and all production overheads. These include the depreciation of
property, plant and equipment and the amortisation of intangible assets relating to production and write-downs of inventories. Cost of
sales also includes freight and insurance costs relating to deliveries to dealers and agency fees in the case of direct sales.
Cost of sales also includes provisions made to cover the estimated cost of product warranties at the time of sale to dealer networks
or to the end customer. Revenues from the sale of extended warranties and maintenance contracts are recognised over the period
during which the service is provided.
Expenses which are directly attributable to the financial services businesses, including the interest expense related to the financing of
financial services businesses as a whole and charges for risk provisions and write-downs, are reported in cost of sales.
Research and development costs
This item includes research costs, development costs not eligible for capitalisation and the amortisation and any impairment losses of
development costs recognised as assets in accordance with IAS 38.
Government grants
In accordance with IAS 20, government grants are recognised in the financial statements when there is reasonable assurance that
the company concerned will comply with the conditions for receiving such grants and that the grants themselves will be received.
Government grants are recognised as income over the periods necessary to match them with the related costs which they are intended
to offset.
The benefit of a government loan at a below-market rate of interest is treated for accounting purposes as a government grant. The
benefit of the below-market rate of interest is measured as the difference between the initial carrying amount of the loan (fair value plus
transaction costs) and the proceeds received, and is accounted for in accordance with the policies already used for the recognition of
government grants.
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.