Chrysler 2014 Annual Report Download - page 172

170 2014 | ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Recoverability of Goodwill and Intangible assets with indefinite useful lives
In accordance with IAS 36 – Impairment of Assets, Goodwill and intangible assets with indefinite useful lives are not
amortized and are tested for impairment annually or more frequently if facts or circumstances indicate that the asset
may be impaired.
Goodwill and intangible assets with indefinite useful lives are allocated to operating segments or to CGUs within the
operating segments, which represent the lowest level within the Group at which goodwill is monitored for internal
management purposes in accordance with IAS 36. The impairment test is performed by comparing the carrying
amount (which mainly comprises property, plant and equipment, goodwill, brands and capitalized development costs)
and the recoverable amount of each CGU or group of CGUs to which Goodwill has been allocated. The recoverable
amount of a CGU is the higher of its fair value less costs to sell and its value in use.
Goodwill and Intangible assets with indefinite useful lives at December 31, 2014 includes €10,185 million of
Goodwill (€8,967 million at December 31, 2013) and €2,953 million of Intangible assets with indefinite useful lives
(€2,600 million at December 31, 2013) resulting from the acquisition of interests in FCA US. Goodwill also includes
€786 million from the acquisition of interests in Ferrari (€786 million at December 31, 2013). The Group did not
recognize any impairment charges for Goodwill and Intangible assets with indefinite useful lives during the years ended
December 31, 2014, 2013 and 2012.
For a discussion on impairment testing of Goodwill and intangible assets with indefinite useful lives, see Note 13.
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 the deferred tax assets to be utilized.
At December 31, 2014, the Group had deferred tax assets on deductible temporary differences of €8,662 million
(€6,183 million at December 31, 2013), of which €480 million was not recognized (€435 million at December 31, 2013).
At the same date the Group had also theoretical tax benefits on losses carried forward of €4,696 million (€3,810 million
at December 31, 2013), of which €2,934 million was unrecognized (€2,891 million at December 31, 2013).
At December 31, 2013, in view of the results achieved by FCA US, 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 FCA and FCA US, following FCA US’s acquisition of the remaining shareholding at the beginning of 2014, the
Group recorded previously unrecognized deferred tax assets for a total of €1,734 million, of which €1,500 million was
recognized in Income taxes and €234 million in Other comprehensive income/(loss).
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, the Group 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 especially as it relates to future
performance in the Eurozone, particularly in Italy. Therefore changes in current estimates due to unanticipated events
could have a significant impact on the Group’s Consolidated financial statements.
Sales incentives
The Group records the estimated cost of sales incentive programs offered to dealers and consumers as a reduction to
revenue at the time of sale of the vehicle to the dealer. This estimated cost represents the incentive programs offered
to dealers and consumers, as well as the expected modifications to these programs in order to facilitate sales of the
dealer inventory. Subsequent adjustments to sales incentive programs related to vehicles previously sold to dealers
are recognized as an adjustment to net revenues in the period the adjustment is determinable.