Chrysler 2015 Annual Report Download - page 162

162 2015 | ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
In addition, the Group makes provisions for estimated product liability costs arising from property damage and
personal injuries including wrongful death, and potential exemplary or punitive damages alleged to be the result of
product defects. By nature, these costs can be infrequent, difficult to predict and have the potential to vary significantly
in amount. 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. Costs associated with these provisions are recorded
in the Consolidated Income Statement and any subsequent adjustments are recorded in the period in which the
adjustment is determined.
Litigation
Various legal proceedings, claims and governmental investigations are pending against the Group on a wide range
of topics, including vehicle safety, emissions and fuel economy, dealer, supplier and other contractual relationships,
intellectual property rights, product warranties and environmental matters. Some of these proceedings allege defects
in specific component parts or systems (including airbags, seats, seat belts, brakes, ball joints, transmissions, engines
and fuel systems) in various vehicle models or allege general design defects relating to vehicle handling and stability,
sudden unintended movement or crashworthiness. These proceedings seek recovery for damage to property,
personal injuries or wrongful death and in some cases include a claim for exemplary or punitive damages. Adverse
decisions in one or more of these proceedings could require the Group to pay substantial damages, or undertake
service actions, recall campaigns or other costly actions.
Litigation is subject to many uncertainties, and the outcome of individual matters is not predictable with assurance.
Moreover, the cases and claims against the Group are often derived from complex legal issues which are subject to
differing degrees of uncertainty, including the facts and circumstances of each particular case, the manner in which
the applicable law is likely to be interpreted and applied and the jurisdiction and the different laws involved. An accrual
is established in connection with pending or threatened litigation if a loss is probable, there will be an outflow of funds
and when the amount can be reasonably estimated. If an outflow of funds becomes probable, but the amount cannot
be estimated, the matter is disclosed in the notes to the Consolidated Financial Statements. Since these accruals
represent estimates, the resolution of some of these matters could require the Group to make payments in excess of
the amounts accrued or may require the Group to make payments in an amount or range of amounts that could not
be reasonably estimated.
The Group monitors the status of pending legal procedures and consults with experts on legal and tax matters on a
regular basis. As such, the provisions for the Group’s legal proceedings and litigation may vary as a result of future
developments in pending matters.