Mercedes 2003 Annual Report Download - page 135
Download and view the complete annual report
Please find page 135 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.5. Functional Costs and Other Expenses
Selling, administrative and other expenses are comprised of the
following:
In 2003, selling expenses include advertising costs of €2,965
million (2002: €2,811 million, 2001: €2,944 million).
In 2003, DaimlerChrysler recognized in accordance with the
provisions of SFAS 144 an impairment charge amounting to €77
million related to certain long-lived assets (primarily property,
plant and equipment) at a production facility in Brazil. The charge
is included in cost of sales of the Mercedes Car Group segment.
In 2002, DaimlerChrysler recognized in accordance with the pro-
visions of SFAS 144 an impairment charge amounting to €201 mil-
lion. Moderate demand and strong competition in the European
market for commercial vehicles resulted in idle capacity at one of
the Group’s German assembly plants. Consequently, Daimler-
Chrysler determined that it does not expect to recover the carrying
value of certain long-lived assets (primarily manufacturing equip-
ment and tooling) at this plant. The charge is included in cost of
sales of the Commercial Vehicles segment.
In 2002, a goodwill impairment charge of €40 million was recog-
nized in connection with the contracted sale of controlling inter-
ests in two businesses in the Commercial Vehicles segment (see
Note 4).
In October 2002, DaimlerChrysler entered into an agreement to
sell to GE Capital a significant portion of its portfolio of corporate
aircraft, consisting of finance lease receivables and owned aircraft
currently under operating leases, over a period of approximately 12
months. The agreement contained provisions for DaimlerChrysler
to receive a share of future payments throughout the remaining
terms of the contracts in the portfolio. In connection with the
agreement, the Group classified as held for sale at December 31,
2002, finance lease receivables with a carrying value of €493 mil-
lion and equipment under operating leases with a carrying value of
€40 million. The agreement with GE Capital was not consummated
as of December 31, 2002. Due primarily to adverse economic con-
ditions, the Group reassessed the recoverability of its leasing port-
folio as of December 31, 2002. Based on the results of this
reassessment, the Services segment recognized impairment losses
of €191 million in other expenses and €20 million in cost of sales.
DaimlerChrysler consummated the GE Capital transaction in 2003
pursuant to which the Services segment sold finance lease receiv-
ables totaling €113 million and equipment under operating leases
totaling €14 million for cash to GE Capital.
During 2003, the Group also sold finance lease receivables total-
ing €191 million and operate leases totaling €5 million to other
investors. At December 31, 2003, after adjustments for currency
translation effects, finance lease receivables of €98 million and
equipment under operating leases totaling €17 million are classi-
fied as held for sale.
Held for sale and held for use finance lease receivables and
equipment under operating leases are classified in the December
31, 2003 and 2002 balance sheets as receivables from financial
services and equipment on operating leases, net, respectively.
In 2002, due to declining resale prices of used passenger cars
and commercial vehicles in North America, DaimlerChrysler recog-
nized impairment charges totaling €256 million upon re-evaluation
of the recoverability of the carrying value of its leased vehicles.
This re-evaluation was performed using product specific cash flow
information. As a result, the carrying values of these leased vehi-
cles were determined to be impaired as the identifiable undis-
counted future cash flows were less than their respective carrying
values. In accordance with SFAS 144, the resulting impairment
charges, recorded as a component of cost of sales in the Services
segment, represent the amount by which the carrying values of
such vehicles exceeded their respective fair market values.
Following a decision of DaimlerChrysler’s Board of Management
in the fourth quarter of 2001, DaimlerChrysler, GE Capital and
other financial services providers reached an agreement during the
six months ended June 30, 2002 to purchase a portion of the
DaimlerChrysler’s commercial real estate and asset-based lending
portfolios in the United States for €1,260 million. The decision
resulted in a charge of €166 million, which is included in other
expenses of the Services segment in 2001.
As discussed in Note 7, the DaimlerChrysler Supervisory Board
approved a multi-year turnaround plan for the Chrysler Group in
February 2001. The related charges are presented as a separate
line item on the accompanying consolidated statements of income
(loss) and are not reflected in cost of sales or selling, administrative
and other expenses.
| 131
Notes to Consolidated Statements of Income (Loss)
130
(in millions of €)
11 , 772
5,500
184
779
18,235
2001
11,981
5,346
40
799
18,166
11,76 3
5,351
–
658
17,772
20022003
Selling expenses
Administration expenses
Goodwill amortization and impairments
Other expenses
Year ended December 31,