Mercedes 2003 Annual Report Download - page 125
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Please find page 125 of the 2003 Mercedes annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Discontinued Operations. The results of operations of discontinued
Group components and gains or losses from their disposal are
each presented separately net of tax in the Group’s statement of
income (loss) before extraordinary income (loss) and the cumulative
effect of changes in accounting principles for all periods presented.
A Group component is considered a discontinued operation if its
operations and cash flows have been or will be eliminated from the
ongoing activities of the Group as a result of the disposal transac-
tion, the Group will not have any significant subsequent continuing
involvement with the component, and the component can be clearly
distinguished, operationally and for financial reporting purposes. If
not disposed of by the balance sheet date, to qualify as discontinued
operations, a component must also meet the conditions to be
classified as held for sale. Results of discontinued operations are
recognized in the period in which they occur.
Pension and Other Postretirement Plans. The measurement of
pension and postretirement benefit liabilities is based upon
the projected unit credit method in accordance with SFAS 87,
“Employers’ Accounting for Pensions,” and SFAS 106, “Employers’
Accounting for Postretirement Benefits Other Than Pensions,”
respectively. As permitted under SFAS 87 and SFAS 106, changes
in the amount of either the projected benefit obligation (for pension
plans), the accumulated benefit obligation (for other postretirement
plans) or plan assets resulting from experience different from that
assumed and from changes in assumptions can result in gains and
losses not yet recognized in the Group’s consolidated financial
statements. The expected return on plan assets is determined based
on the expected long-term rate of return on plan assets and the
fair value or market-related value of plan assets. Amortization of
an unrecognized net gain or loss is included as a component of
the Group’s net periodic benefit plan cost for a year if, as of the
beginning of the year, that unrecognized net gain or loss exceeds
10 percent of the greater of (1) the projected benefit obligation (for
pension plans) or the accumulated postretirement benefit obligation
(for other postretirement plans) or (2) the fair value or market-related
value of that plan’s assets. In such case, the amount of amortization
recognized by the Group is the resulting excess divided by the
average remaining service period of active employees expected to
receive benefits under the plan (see Note 25a).
Earnings Per Share. Basic earnings per share is calculated by
dividing income (loss) from continuing operations and net income
(loss), respectively, by the weighted average number of shares out-
standing. Diluted earnings per share reflects the potential dilution
that would occur if all securities and other contracts to issue Ordi-
nary Shares were exercised or converted (see Note 35).
Goodwill and Other Intangible Assets. SFAS 141, “Business
Combinations,” requires that the purchase method of accounting
be used for all business combinations initiated after June 30, 2001.
Goodwill represents the excess of the cost of an acquired entity
over the fair values assigned to the assets acquired and the liabilities
assumed. SFAS 141 also specifies the types of acquired intangible
assets that are required to be recognized and reported separately
from goodwill and those acquired intangible assets that are required
to be included in goodwill.
As a result of the adoption of SFAS 142 as of January 1, 2002,
goodwill acquired and intangible assets determined to have an
indefinite useful life are not amortized, but instead are tested for
impairment. Prior to the adoption of SFAS 142, goodwill was
amortized on a straight-line basis over its estimated useful life
of 3 to 40 years, and assessed for recoverability based on
estimated undiscounted future cash flows.
DaimlerChrysler evaluates the recoverability of its goodwill at
least annually or when significant events occur or there are changes
in circumstances that indicate the fair value of a reporting unit of
the Group is less than its carrying value. The Group determines the
fair value of each of its reporting units by estimating the present
value of their future cash flows. In addition, any recognized
intangible asset determined to have an indefinite useful life is tested
at least annually for impairment in accordance with SFAS 142
until its life is determined to no longer be indefinite. SFAS 142 also
requires that intangible assets with estimable useful lives be valued
at acquisition cost, amortized over their respective estimated useful
lives (2 to 10 years) to their estimated residual values, and
reviewed for impairment in accordance with SFAS 144, “Account-
ing for the Impairment or Disposal of Long-Lived Assets.”
In connection with the transitional impairment evaluation, SFAS
142 required DaimlerChrysler to perform an assessment of
whether there was an indication that goodwill was impaired as of
January 1, 2002. To accomplish this, DaimlerChrysler (1) identified
its reporting units, (2) determined the carrying value of each
reporting unit by assigning the assets and liabilities, including the
existing goodwill and intangible assets, to those reporting units,
and (3) determined the fair value of each reporting unit. Daimler-
Chrysler completed this first step of the transitional assessment
for all of the Group’s reporting units by June 30, 2002 and deter-
mined that there was no indication that goodwill had been
impaired as of January 1, 2002. Accordingly, no transitional good-
will impairment charge was necessary.
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