Mercedes 2003 Annual Report Download - page 127
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Please find page 127 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.Marketable Securities and Investments. Securities and certain
investments are accounted for at fair value, if it is readily deter-
minable. Unrealized gains and losses on trading securities, repre-
senting securities bought and held principally for the purpose of
near term sales, are included in earnings. Unrealized gains and
losses on available-for-sale securities are included as a component
of accumulated other comprehensive income (loss), net of
applicable taxes, until realized. All other securities and investments
are recorded at cost. A decline in value of any available-for-sale
security below cost that is deemed to be other than temporary
results in a deduction in carrying amount to fair value. The impair-
ment is charged to earnings and a new cost basis for the security
is established.
Cash Equivalents. The Group’s liquid assets are recorded under
various balance sheet captions as more fully described in Note 21.
For purposes of the consolidated statements of cash flows, the
Group considers all highly liquid instruments with original maturities
of three months or less to be cash equivalents.
Derivative Instruments and Hedging Activities. DaimlerChrysler
uses derivative financial instruments such as forward contracts,
swaps, options, futures, swaptions, forward rate agreements, caps
and floors for hedging purposes. The accounting of derivative
instruments is based upon the provisions of SFAS 133, “Accounting
for Derivative Instruments and Hedging Activities,” as amended.
On the date a derivative contract is entered into, DaimlerChrysler
designates the derivative as either a hedge of the fair value of a
recognized asset or liability or of an unrecognized firm commitment
(fair value hedge), a hedge of a forecasted transaction or the vari-
ability of cash flows to be received or paid related to a recognized
asset or liability (cash flow hedge), or a hedge of a net investment in
a foreign operation. DaimlerChrysler recognizes all derivative
instruments as assets or liabilities on the balance sheet and mea-
sures them at fair value, regardless of the purpose or intent for
holding them. Changes in the fair value of derivative instruments
are recognized periodically either in earnings or stockholders’
equity, as a component of accumulated other comprehensive
income (loss), depending on whether the derivative is designated
as a hedge of changes in fair value or cash flows. For derivatives
designated as fair value hedges, changes in fair value of the hedged
item and the derivative are recognized currently in earnings. For
derivatives designated as cash flow hedges, fair value changes of
the effective portion of the hedging instrument are recognized in
accumulated other comprehensive income on the balance sheet,
net of applicable taxes, until the hedged item is recognized in
earnings. The ineffective portions of the fair value changes are
recognized in earnings immediately. Derivatives not meeting the
criteria for hedge accounting are marked to market and impact
earnings. SFAS 133 also requires that certain derivative instruments
embedded in host contracts be accounted for separately as
derivatives.
Further information on the Group’s financial instruments is
included in Note 32.
Commitments and Contingencies. Liabilities for loss contingencies
are recorded when it is probable that a liability has been incurred
and the amount can be reasonably estimated.
DaimlerChrysler accrues for losses associated with environmental
remediation obligations when such losses are probable and
reasonably estimable. Accruals for estimated losses from environ-
mental remediation obligations generally are recognized no later
than completion of the remedial feasibility study. Such accruals are
adjusted as further information develops or circumstances change.
Costs of future expenditures for environmental remediation
obligations are not discounted to their present value. Recoveries of
environmental remediation costs from other parties are recorded
as assets when their receipt is deemed probable.
Deposits from Direct Banking Business. Demand deposit
accounts are classified as financial liabilities. Interest paid on
demand deposit accounts is recognized in cost of sales as incurred.
New Accounting Standards. In June 2001, the Financial Account-
ing Standards Board (“FASB”) issued SFAS 143, “Accounting for
Asset Retirement Obligations.” SFAS 143 requires DaimlerChrysler
to record the fair value of an asset retirement obligation as a liability
in the period in which it incurs a legal obligation associated with
the retirement of tangible long-lived assets that result from the
acquisition, construction, development and/or the normal use of
the asset. The Group also records a corresponding asset that is
depreciated over the life of the asset to be retired. Subsequent to
the initial measurement of the asset retirement obligation, the
liability is adjusted at the end of each period to reflect the passage
of time and changes in the estimated future cash flows underlying the
obligation. The Group was required to adopt SFAS 143 on January 1,
2003. The adoption of SFAS 143 did not have a significant impact
on the Group’s consolidated financial statements.
In June 2002, the FASB issued SFAS 146, “Accounting for Costs
Associated with Exit or Disposal Activities.” SFAS 146 addresses
financial accounting and reporting for costs associated with exit or
disposal activities and nullifies EITF Issue No. 94-3, “Liability
Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity.” The provisions of SFAS 146 were effective
for exit or disposal activities initiated after December 31, 2002.
The adoption of SFAS 146 did not have a significant impact on the
Group’s consolidated financial statements.
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