Chrysler 2013 Annual Report Download - page 206

205
Consolidated
Financial Statements
at 31 December 2013
A description of these follows:
Sales incentives that are offered on a contractual basis to the Group’s dealer networks, primarily on the basis of a specific cumulative level
of sales transactions during a certain period. The provision also includes sales cash incentives provided to retail customers.
Legal proceedings and other disputes, this provision represents management’s best estimate of the liability to be recognized by the
Group with regard to legal proceedings arising in the ordinary course of business with dealers, customers, suppliers or regulators (such
as contractual or patent disputes), legal proceedings involving claims with active and former employees and Legal proceedings involving
different tax authorities.
None of these provisions is individually significant. Each Group company recognizes a provision for legal proceedings when it is deemed
probable that the proceedings will result in an outflow of resources. In determining their best estimate of the liability, each Group company
evaluates their legal proceedings on a case-by-case basis to estimate the probable losses that typically arise from events of the type giving
rise to the liability. Their estimate takes into account, as applicable, the views of legal counsel and other experts, the experience of the Group
and others in similar situations and the Group’s intentions with regard to further action in each proceeding. Group’s consolidated provision
combines these individual provisions established by each of the Group’s companies.
Commercial risks arising in connection with the sale of products and services such as maintenance contracts. An accrual is recorded when
the expected costs to complete the services under these contracts exceed the revenues expected to be realized.
Environmental risks, this provision represents best estimate of the Group’s probable environmental obligations. Amounts included in the
estimate comprise direct costs to be incurred by the Group in connection with environmental obligations associated with current or formerly
owned facilities and sites. This provision also includes costs related to claims on environmental matters.
Indemnities estimated by the Group in connection with divestitures. These liabilities primarily arise from indemnities relating to contingent
liabilities in existence at the time of the sale, as well as those covering any possible breach of the representations and warranties provided
in the contract and, in certain instances, environmental or tax matters. These provisions were determined estimating the amount of the
expected outflow of resources, taking into consideration the relevant level of probability of occurrence.
Other risk and charges, this provision includes, among others, the estimated product liability costs arising from personal injuries alleged to
be the result of product defects. The valuation of the reserve is actuarially determined on an annual basis based on, among other factors,
the number of vehicles sold and product liability claims incurred.