Mercedes 2006 Annual Report Download - page 168

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The recognition of the funded status in accordance with SFAS 158,
“Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans - an amendment of FASB Statements No. 87,
88, 106, and 132(R),” was adopted as of December 31, 2006.
Prior to adoption, actuarial gains and losses were recognized on a
delayed basis in the income statement and the funded status was
not recognized on the balance sheet. Actuarial gains and losses
comprise changes in the amount of either the projected benefit
obligation (for pension plans), the accumulated benefit obligation
(for other postretirement plans) or differences between actual and
expected return on plan assets and from changes in assumptions.
With the adoption of the recognition provisions in SFAS 158 as
of December 31, 2006, the funded status of defined benefit plans
is recognized entirely on the balance sheet. Under SFAS 158,
the amount recognized as asset or liability for pension and other
postretirement benefit plans is measured as the difference
between the benefit obligation and the fair value of plan assets.
Overfunded plans are aggregated and recognized as an asset
while underfunded plans are aggregated and recognized as a
liability. The offsetting entry for previously unrecognized actuarial
gains and losses, and prior service cost or credits is made in
accumulated other comprehensive loss. The amounts in accumu-
lated other comprehensive loss are recognized net of income
tax effects with respective adjustments in deferred tax assets and
liabilities. The adoption of SFAS 158 does not impact the
recognition policies for pension costs in the consolidated income
statement.
Earnings per share. Basic earnings per share are calculated
by dividing net income by the weighted average number of shares
outstanding. Diluted earnings per share reflect the potential
dilution that would occur if all securities and other contracts to
issue ordinary shares were exercised or converted. See Note 35
for further information.
Goodwill and other intangible assets. The Group accounts for
all business combinations initiated after June 30, 2001, in
accordance with SFAS 141, “Business Combinations” using the
purchase method of accounting. Goodwill represents the excess
of the cost of an acquired entity over the fair values assigned to
the assets acquired and the liabilities assumed after taking
into consideration the types of acquired intangible assets that
are required to be recognized and reported separately from
goodwill.
Goodwill acquired and intangible assets determined to have an
indefinite useful life are not amortized, but instead are tested for
impairment. DaimlerChrysler evaluates the recoverability of
its goodwill at least annually or when significant events occur or
when 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 impair-
ment until its life is determined to be no longer indefinite.
Intangible assets with estimable useful lives are valued at acqui-
sition cost, are amortized on a straight-line basis over their
respective estimated useful lives (2 to 10 years) to their estimated
residual values, and are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount of the asset or asset group may not be recoverable.