Mercedes 2004 Annual Report Download - page 112

1. Summary of Significant Accounting Policies
General. The consolidated financial statements of Daimler-
Chrysler AG and subsidiaries (“DaimlerChrysler” or the “Group”)
have been prepared in accordance with generally accepted
accounting principles in the United States of America (“U.S.
GAAP”). All amounts herein are presented in euros (“€”) and, for
the year 2004 amounts, also in U.S. dollars (“$”), the latter being
unaudited and presented solely for the convenience of the reader
at the rate of €1 = $1.3538, the Noon Buying Rate of the Federal
Reserve Bank of New York on December 31, 2004.
Certain amounts reported in previous years have been reclassi-
fied to conform to the 2004 presentation. In 2004, the presenta-
tion of the consolidated statements of cash flows was modified
with regard to certain receivables from financial services. Further
information, including the effects on comparative periods pre-
sented in the financial statements, is provided in Note 2.
Commercial practices with respect to certain products manufac-
tured by DaimlerChrysler necessitate that sales financing,
including leasing alternatives, be made available to the Group’s
customers. Accordingly, the Group’s consolidated financial
statements are also significantly influenced by activities of its
financial services business. To enhance the readers’ understand-
ing of the Group’s consolidated financial statements, the accom-
panying financial statements present, in addition to the audited
consolidated financial statements, unaudited information with
respect to the financial position, results of operations and cash
flows of the Group’s industrial and financial services business
activities. Such information, however, is not required by U.S.
GAAP and is not intended to, and does not represent the sepa-
rate U.S. GAAP financial position, results of operations and cash
flows of the Group’s industrial or financial services business
activities. Transactions between the Group’s industrial and finan-
cial services business activities principally represent intercompa-
ny sales of products, intercompany borrowings and related
interest, and other support under special vehicle financing
programs. The effects of transactions between the industrial and
financial services businesses have been eliminated within the
industrial business columns.
Use of Estimates. Preparation of the financial statements in
conformity with U.S. GAAP requires management to make esti-
mates and assumptions related to the reported amounts of
assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenses for the period.
Significant items related to such estimates and assumptions
include recoverability of investments in equipment on operating
leases, collectibility of sales financing and finance lease receiv-
ables, realizability of investments in associated companies, war-
ranty obligations, sales incentive obligations, valuation of deriva-
tive instruments, and assets and obligations related to employee
benefits. Actual amounts could differ from those estimates.
DaimlerChrysler’s financial position, results of operations, and
cash flows are subject to numerous risks and uncertainties. Fac-
tors that could affect DaimlerChrysler’s future financial state-
ments and cause actual results to vary materially from expecta-
tions include, but are not limited to, further adverse changes in
global economic conditions; overcapacity and intense competi-
tion in the automotive industry; the concentrations of Daimler-
Chrysler’s revenues derived from the United States and Western
Europe; the significant portion of DaimlerChrysler’s workforce
subject to collective bargaining agreements; fluctuations in
currency exchange rates, interest rates and commodity prices;
significant legal proceedings and environmental and other
government regulations.
Principles of Consolidation. The accompanying consolidated
financial statements include the financial statements of Daimler-
Chrysler AG and all of its material, majority-owned subsidiaries
and certain variable interest entities for which DaimlerChrysler is
determined to be the primary beneficiary (see Note 3).
All significant intercompany accounts and transactions relating
to consolidated subsidiaries and consolidated variable interest
entities have been eliminated.
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Notes to Consolidated Financial Statements –
Basis of Presentation