Chrysler 2013 Annual Report Download - page 143

142 Consolidated
Financial Statements
at 31 December 2013
Notes
Revenue recognition
Revenue for sale of vehicles and service parts is recognized if it is probable that the economic benefits associated with a transaction will flow to
the Group and the revenue can be reliably measured. Revenue is recognized when the risks and rewards of ownership are transferred to the
customer, the sales price is agreed or determinable and collectability is reasonably assured; for vehicles this corresponds generally to the date
when the vehicles are made available to dealers, or when the vehicle is released to the carrier responsible for transporting vehicles to dealers.
Revenues are recognized net of discounts, including but not limited to, sales incentives and customer bonus.
The estimated costs of sales incentive programs incudes incentive offered to dealers and retail customers as well as any granting of retail
financing at significant discount to market interest rates. These costs are recognized at the time of the sale of the vehicle.
New vehicle sales with a buy-back commitment, or through Guaranteed Depreciation Program (“GDP”), under which the Group guarantees
the residual value or otherwise assumes responsibility for the minimum resale value of the vehicle, are not recognized at the time of delivery but
are accounted for similar to an operating lease and rental income is recognized over the contractual term of the lease on a straight-line basis.
At the end of the lease term, the Group recognizes revenue for the portion of the vehicle sales price which had not been previously recognized
as rental income and recognizes, in Cost of sales, the remainder of the cost of the vehicle.
Revenues from services and from construction contracts are recognized when they are rendered by reference to the stage of completion.
Revenues also include lease rentals recognized over the contractual term of the lease on a straight-line basis and interest income from financial
services companies.
Cost of sales
Cost of sales comprises expenses incurred in the manufacturing and distribution of vehicles and parts, mainly the cost of materials and
components. The remaining costs principally include labor costs, consisting of direct and indirect wages, as well as depreciation, amortization
and transportation costs. Cost of sales also includes warranty and product-related costs, estimated at the time of sale to dealer networks or
to the end customer.
Expenses which are directly attributable to the financial services companies, including the interest expenses related to their financing as a whole
and provisions for risks and write-downs of assets, are reported in Cost of sales.
Government grants
Government grants are recognized 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 recognized 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 used for the recognition of government grants.
Taxes
Income taxes include all taxes based upon the taxable profits of the Group. Current and deferred taxes are recognized as income or expense
and included in the Income statement for the period, except tax arising from (i) a transaction or event which is recognized, in the same or a
different period, either in Other comprehensive income/(losses) or directly in Equity, (ii) a business combination.
Deferred taxes are accounted for under the full liability method. They are recognized for all temporary differences between the tax base of assets
or liabilities and their carrying amounts in the Consolidated financial statements, except for deferred tax liabilities arising from the initial recognition