Chrysler 2013 Annual Report Download - page 147

146 Consolidated
Financial Statements
at 31 December 2013
Notes
Recoverability of deferred tax assets
The carrying amount of deferred tax assets is reduced to the extent that it is not probable that sufficient taxable profit will be available to allow
the benefit of part or all of that deferred tax assets to be utilized.
At 31 December 2013, the Group had deferred tax assets on deductible temporary differences of €6,173 million (€6,353 million at 31
December 2012), of which €435 million was not recognized (€2,445 million at 31 December 2012). At the same date the Group had
also theoretical tax benefit of losses carried forward of €3,810 million (€3,399 million at 31 December 2012), of which €2,891 million was
unrecognized (€2,473 million at 31 December 2012). In addition, at 31 December 2013, in view of the results achieved by Chrysler, of
the continuous improvement of its product mix, its trends in international sales and its implementation of new vehicles, together with the
consolidation of the alliance between Fiat and Chrysler, following Fiat’s acquisition of the remaining shareholding at the beginning of 2014,
the Group recognized previously unrecognized deferred tax assets for a total of €1,734 million, of which €1,500 million recognized in Income
taxes and €234 million in Other comprehensive income/(losses).
The recoverability of deferred tax assets is dependent on the Group’s ability to generate sufficient future taxable income in the period in which
it is assumed that the deductible temporary differences reverse and tax losses carried forward can be utilized. In making this assessment, the
Group considers future taxable income arising on the most recent budgets and plans, prepared by using the same criteria described for testing
the impairment of assets and goodwill, moreover, it estimates the impact of the reversal of taxable temporary differences on earnings and it
also considers the period over which these assets could be recovered.
These estimates and assumptions are subject to a high degree of uncertainty, in particular with regard to the future performance in the
Eurozone, therefore changes in current estimates due to unanticipated events could have a significant impact on the Group’s Consolidated
financial statements.
Pension plans and other post-retirement benefits
At 31 December 2013 net liabilities and net assets for employee benefit, amounting to €7,181 million and to €95 million, respectively (€10,256
million and €83 million, respectively at 31 December 2012), are measured on an actuarial basis which requires the use of estimates and
assumptions to determine the net liability or net asset. The actuarial method takes into consideration parameters of a financial nature such as
the discount rate and the return on plan assets, the rates of salary increases and the rates of health care cost increases and the likelihood of
potential future events estimated by using demographic assumptions such as mortality rates, dismissal and retirement rates.
In particular, the discount rates selected are based on high quality corporate bonds in the relevant market. The return on plan assets is interest,
dividends and other revenue derived from the plan assets, together with realized and unrealized gains or losses on the plan assets, less any
costs of administering the plan and less any tax payable by the plan itself (other than those included in the actuarial assumptions used to
measure the defined benefit obligation). Rates of salary increases reflect the Group’s long-term actual expectation in the reference market
and inflation trends. Trends in health care costs are developed on the basis of historical experience, the near-term outlook for costs and likely
long-term trends. Changes in any of these assumptions are recognized in Other comprehensive income/(losses) when they occur and may
have an effect on future contributions to the plans.
Net realizable value of Inventories
At 31 December 2013 the Group had Inventories of €10,230 million (€9,295 million at 31 December 2012), measured at the lower of cost and
their net realizable value. Net realizable value is based on the most reliable evidence of the amount the Group expects to realize from vehicles
and components, on future sales trends or needs (for components) and also takes into account items that are wholly or partially obsolete. A
future unexpected worsening in market conditions could result in an adjustment in future expected sales, requirements and in estimated selling
prices assumptions which may require an adjustment to the carrying amount of Inventories.