Mercedes 2003 Annual Report Download - page 128
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In November 2002, the Emerging Issues Task Force (“EITF”)
reached a final consensus on EITF 00-21, “Revenue Arrangements
with Multiple Deliverables.” The scope provisions of EITF 00-21
were slightly modified in May 2003. EITF 00-21 addresses certain
aspects for the accounting of revenue arrangements with multiple
deliverables by a vendor. EITF 00-21 outlines an approach to
determine when a revenue arrangement that contains multiple
deliverables should be divided into separate units of accounting and,
if separation is appropriate, how the arrangement consideration
should be allocated to the identified accounting units. EITF 00-21
became effective for DaimlerChrysler in its financial statements
beginning July 1, 2003 and DaimlerChrysler applied the consensus
prospectively to all transactions occurring after June 30, 2003.
The adoption of EITF 00-21 did not have a significant impact on the
Group’s consolidated financial statements.
In November 2002, the FASB issued Interpretation (“FIN”) 45,
“Guarantor’s Accounting and Disclosure Requirements for Guaran-
tees, Including Indirect Guarantees of Indebtedness of Others – an
interpretation of FASB Statements No. 5, 57, and 107 and rescis-
sion of FASB Interpretation No. 34.” FIN 45 enhances the disclo-
sures to be made by a guarantor in its financial statements about
its obligations under certain guarantees issued. FIN 45 also clari-
fies that a guarantor is required to recognize, at inception of a
guarantee, a liability for the fair value of the non-contingent portion
of the obligation due to the issuance of the guarantee or, if higher,
a probable loss under SFAS 5. The initial recognition and measure-
ment provisions of FIN 45 were applicable to guarantees issued or
modified after December 31, 2002, without significant impact to
the Group’s consolidated financial statements. The disclosures
required by FIN 45 were effective for financial statements of inter-
im and annual periods ending after December 15, 2002 (see Notes
25b and 31).
In December 2002, the FASB issued SFAS 148, “Accounting for
Stock-Based Compensation – Transition and Disclosure – an
amendment of FASB Statement No. 123.” SFAS 148 amends SFAS
123, “Accounting for Stock-Based Compensation,” to provide alter-
native methods of transition for a voluntary change to the fair value
based method of accounting for stock-based employee compensa-
tion. In addition, SFAS 148 requires disclosures in both interim and
annual financial statements of the method of accounting used for
stock-based employee compensation and the effect of the method
used on reported results (see Note 24 and table presented below).
During the second quarter of 2003, DaimlerChrysler adopted the
fair value recognition provisions of SFAS 123 prospectively, as per-
mitted by SFAS 148, to all employee awards granted, modified, or
settled after January 1, 2003. Compensation expense for all
awards granted prospectively from December 31, 2002, will be
measured at the grant date based on the fair value of the equity
award using a modified Black-Scholes option-pricing model. Com-
pensation expense will be recognized over the employee service
period with an offsetting credit to equity (paid-in capital). Daimler-
Chrysler options granted prior to January 1, 2003, will continue to
be accounted for using the intrinsic value based approach under
Accounting Principles Board Opinion (“APB”) No. 25, “Accounting
for Stock Issued to Employees,” and related Interpretations. Com-
pensation expense under APB 25 was measured at the grant date
based on the difference between the strike price of the equity
award and the fair value of the underlying stock as of the date of
grant. The adoption of the fair value based method for awards
granted in April 2003 resulted in additional compensation expense
in the Group’s statement of income (loss) of €37 million for 2003,
(€23 million, net of taxes, or €0.02 per share, respectively). The fol-
lowing table illustrates the effect on net income (loss) and earnings
(loss) per share if the fair value based method had been applied to
all outstanding and unvested awards in each period.
In December 2003, the FASB issued FIN 46 (revised December
2003), “Consolidation of Variable Interest Entities” (“FIN 46R”),
which addresses how a business enterprise should evaluate
whether it has a controlling financial interest in an entity through
means other than voting rights and accordingly should consolidate
the entity. FIN 46R replaces FIN 46, “Consolidation of Variable
Interest Entities,” which was issued in January 2003. Daimler-
Chrysler applied the unmodified provisions of FIN 46R to “special
purpose entities” as of December 31, 2003. DaimlerChrysler will
apply FIN 46R to all entities that are not “special purpose entities”
as of March 31, 2004.
2001
20022003
(662)
22
(94)
(734)
(0.66)
(0.73)
(0.66)
(0.73)
448
81
(164)
365
0.44
0.36
0.44
0.36
4,718
47
(161)
4,604
4.68
4.57
4.67
4.54
Year ended December 31,
(in millions of €)
Net income (loss)
Add: Stock-based employee compensation
expense included in reported net income,
net of related tax effects
Deduct: Total stock-based employee
compensation expense determinded under
fair value based method for all awards,
net of related tax effects
Pro forma net income (loss)
Earnings (loss) per share (in €):
Basic
Basic – pro forma
Diluted
Diluted – pro forma