Mercedes 1998 Annual Report Download - page 110

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
106
In determining the fair values of derivative financial
instruments, certain compensating effects from underlying
transactions (e.g. firm commitments and anticipated
transactions) are not taken into consideration. At December
31, 1998 and 1997, the Group had deferred net unrealized
gains (losses) on forward currency exchange contracts and
options of € 325 and € (243), respectively, purchased against
firm foreign currency denominated sales commitments
extending for varying periods between three and twenty-four
months.
The carrying amounts of cash, other receivables and accounts
payable approximate fair values due to the short-term
maturities of these instruments.
The methods and assumptions used to determine the fair
values of other financial instruments are summarized below:
Financial Assets and Securities – Fair value of securities in the
portfolio was estimated using quoted market prices. The Group
has certain equity investments in related and affiliated
companies not presented in the table, as certain of these
investments are not publicly traded and determination of fair
values is impracticable.
Receivables from Financial Services – The carrying amount of
variable rate finance receivables was estimated to approximate
fair value since they are priced at current market rates. The fair
value of fixed rate finance receivables was estimated by
discounting expected cash flows using the current rates at
which comparable loans of similar maturity would be obtained
made as of December 31, 1998 and 1997.
The fair values of residual cash flows and other subordinated
amounts arising from receivable sale transactions were
estimated by discounting expected cash flows at current
market rates.
Financial Liabilities – Fair value of publicly traded debt was
estimated using quoted market prices. The fair value of other
long-term notes and bonds was estimated by discounting future
cash flows using rates currently available for debt of similar
terms and remaining maturities. The carrying amounts of
commercial paper and borrowings under revolving credit
facilities were assumed to approximate fair value due to their
short maturities.
c) Fair value of financial instruments
The fair value of a financial instrument is the price at which
one party would assume the rights and/or duties of another
party. Fair values of financial instruments have been
determined with reference to available market information at
the balance sheet date and the valuation methodologies
discussed below. Considering the variability of their value-
At December 31, 1998 At December 31, 1997
Carrying Fair Carrying Fair
amount value amount value
Balance Sheet Financial Instruments:
Assets:
Financial assets 912 912 1,485 1,485
Receivables from financial services 26,468 26,460 21,717 21,818
Securities 12,160 12,160 10,180 10,180
Cash and cash equivalents 6,590 6,590 6,809 6,809
Other 261 261 336 336
Liabilities:
Financial liabilities 40,430 40,459 34,375 35,236
Off-Balance Sheet Financial Instruments:
Assets:
Currency contracts 338 744 173 367
Interest rate contracts 97 309 60 116
Liabilities:
Currency contracts 268 349 535 972
Interest rate contracts 19 303 48 222
determining factors, the fair values presented herein may not be
indicative of the amounts that the Group could realize in a
current market exchange.
The carrying amounts and fair values of the Group’s financial
instruments are as follows: