Chrysler 2013 Annual Report Download - page 145

144 Consolidated
Financial Statements
at 31 December 2013
Notes
The Luxury Brands (Ferrari and Maserati) grouping earns its revenues from the production and sale of luxury sport cars under the Ferrari and
Maserati brands, from managing the Ferrari racing team and from providing financial services offered in conjunction with the sale of Ferrari
brand cars.
The Components (Magneti Marelli, Teksid and Comau) grouping earns its revenues from the production and sale of lighting components,
engine control units, suspensions, shock absorbers, electronic systems and exhaust systems and from activities in the plastic molding
components and in the after-market carried out under the Magneti Marelli brand name, cast iron components for engines, gearboxes,
transmissions and suspension systems and aluminum cylinder heads (Teksid), in addition to the design and production of industrial
automation systems and related products for the automotive industry (Comau).
The regions and operating segments reflect the components of the Group that are regularly reviewed by the Chief Executive Officer together
with the Group Executive Council for making strategic decisions, allocating resources and assessing performance.
Use of estimates
The Consolidated financial statements are prepared in accordance with IFRS which require the use of estimates, judgments and assumptions
that affect the carrying amount of assets and liabilities, the disclosures relating to contingent liabilities and the amounts of income and expenses
recognized. The estimates and associated assumptions are based on elements that are known when the financial statements are prepared,
on historical experience and on any other factors that are considered to be relevant.
The estimates and underlying assumptions are reviewed periodically and continuously by the Group. If the items subject to estimates do not
perform as assumed, then the actual results could differ from the estimates, which would require adjustment accordingly. The effects of any
changes in estimate are recognized in the Income statement in the period in which the adjustment is made, or in future periods.
The main items affected by these uses of estimates are non-current assets (Tangible and Intangible assets), Deferred tax assets, Provision for
employee benefits and Inventories. Following are the items requiring estimates for which there is a risk that a significant difference may arise in
respect of the carrying amounts of assets and liabilities in the future.
Recoverability of non-current assets
Non-current assets include Property, plant and equipment, Goodwill and Intangible assets with definite and indefinite useful lives. The Group
periodically reviews the carrying amount of non-current assets and that of assets held for sale when events and circumstances warrant such a
review. Impairment testing is performed by comparing the carrying amount and the recoverable amount of each cash-generating unit (“CGU”).
The recoverable amount is the higher of the CGUs fair value less costs of disposal and their value in use. In assessing the value in use, the pre-
tax estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the CGU.
The analysis of the recoverable amount of non-current assets is performed at least annually for CGUs to which Goodwill or Intangible assets
with indefinite useful lives have been allocated. For a discussion on impairment testing on Goodwill arising from the Chrysler acquisition and
Intangible assets with an indefinite useful life, reference should be made to Note 13.
For other CGUs, the same analysis is performed when events and circumstances indicate that an asset may be impaired. At 31 December
2012 and 2013, due to the continued decline in car demand on the European market (primarily in Italy) and to the streamlining of architectures(1)
and related production platforms associated with the region’s refocused product strategy, impairment tests relating to EMEA net assets were
performed on two levels.
(1) The “vehicle architecture” is the combination of systems that enables the generation of specific vehicle platforms for the different models in a certain segment.