Chrysler 2013 Annual Report Download - page 140

139
Consolidated
Financial Statements
at 31 December 2013
Gains and losses on available-for-sale financial assets are recognized in Other comprehensive income/(losses) until the financial asset is
disposed of or is impaired; when the asset is disposed of, the cumulative gains or losses, including those previously recognized in Other
comprehensive income/(losses), are reclassified to the Income statement for the period, within Financial income and expenses; when the asset
is impaired, accumulated losses are recognized in the Income statement. Gains and losses arising from changes in the fair value of held-for-
trading financial instruments are included in the Income statement for the period.
Loans and receivables which are not held by the Group for trading (loans and receivables originating in the course of business), held-to-maturity
securities and equity investments whose fair value cannot be determined reliably, are measured, to the extent that they have a fixed term, at
amortized cost, using the effective interest method. When the financial assets do not have a fixed term, they are measured at acquisition cost.
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. Assessments are made regularly as to whether there is any objective evidence that a financial asset or group of assets may be
impaired. If any such evidence exists, an impairment loss is included in the Income statement for the period.
Except for derivative instruments, financial liabilities are measured at amortized cost using the effective interest method.
Financial assets and liabilities hedged against changes in fair value (fair value hedge) are measured in accordance with hedge accounting
principles: gains and losses arising from remeasurement at fair value, due to changes in the respective hedged risk, are recognized in the
Income statement and are offset by the effective portion of the loss or gain arising from remeasurement at fair value of the hedging instrument.
Derivative financial instruments
Derivative financial instruments are used for hedging purposes, in order to reduce currency, interest rate and market price risks (primarily
concerning commodities and securities). In accordance with IAS 39, derivative financial instruments qualify for hedge accounting only when
at the inception of the hedge there is formal designation and documentation of the hedging relationship, the hedge is expected to be highly
effective, its effectiveness can be reliably measured and it is highly effective throughout the financial reporting periods for which it is designated.
All derivative financial instruments are measured at fair value.
When derivative financial instruments qualify for hedge accounting, the following accounting treatments apply:
Fair value hedges – Where a derivative financial instrument is designated as a hedge of the exposure to changes in fair value of a recognized
asset or liability that is attributable to a particular risk and could affect the Income statement, the gain or loss from remeasuring the hedging
instrument at fair value is recognized in the Income statement. The gain or loss on the hedged item attributable to the hedged risk adjusts
the carrying amount of the hedged item and is recognized in the Income statement.
Cash flow hedges – Where a derivative financial instrument is designated as a hedge of the exposure to variability in future cash flows of a
recognized asset or liability or a highly probable forecasted transaction and could affect the Income statement, the effective portion of any
gain or loss on the derivative financial instrument is recognized directly in Other comprehensive income/(losses). The cumulative gain or loss
is reclassified from Other comprehensive income/(losses) to the Income statement at the same time as the economic effect arising from the
hedged item affects income. The gain or loss associated with a hedge or part of a hedge that has become ineffective is recognized in the
Income statement immediately. When a hedging instrument or hedge relationship is terminated but the hedged transaction is still expected
to occur, the cumulative gain or loss realized to the point of termination remains in Other comprehensive income/(losses) and is recognized in
the Income statement at the same time as the underlying transaction occurs. If the hedged transaction is no longer probable, the cumulative
unrealized gain or loss held in Other comprehensive income/(losses) is recognized in the Income statement immediately.