Mercedes 2006 Annual Report Download - page 227

EU regulation on the application of International Financial
Reporting Standards (IFRS). In July 2002, the European
Parliament and the European Council passed Regulation 1606/2002
on the application of IFRS. All publicly traded companies domiciled
in an EU member state are obliged to prepare their consolidated
financial statements in accordance with IFRS for financial years
beginning on or after January 1, 2005. The member states are
allowed, however, to defer the mandatory application of IFRS
until 2007 for companies that are only listed with debt securities
or that already apply internationally accepted standards for
purposes of stock-exchange listings outside the European Union.
The latter is applicable in particular for companies such as
DaimlerChrysler that are listed on the New York Stock Exchange
and therefore prepare their consolidated financial statements
in accordance with US GAAP. In Germany, this deferment option
was implemented in December 2004 within the context of the
Financial Statements Law Reform Act (BilReG).
Transition to IFRS at DaimlerChrysler.
Starting in 2007, financial
disclosure will be based on IFRS financial statements, which will
constitute the Group’s primary accounting principles for external
reporting and internal controlling. We will prepare and publish
our first consolidated financial statements according to IFRS for
financial year 2006 (including 2005 as a comparative period).
The half-year financial statements and the year-end financial state-
ments will each be supplemented by a reconciliation to US GAAP
concerning the Group’s equity capital and net profit/loss for the
period.
IFRS as new basis for performance measures. The perfor-
mance measures used by the Group will basically remain un-
changed under IFRS. Value added and the performance measures
derived therefrom, such as return on net assets (RONA), will
continue to reflect the interests of our investors. Likewise, the
distinction between Group level and divisional level, further
differentiated into industrial business and Financial Services, will
remain. However, definitions of individual performance measures
will differ as a result of differences between the recognition and
measurement rules of IFRS and US GAAP, as described below,
and the methodological adjustments made. This applies, for
example, to operating profit, which under IFRS will be replaced
by EBIT (earnings before interest and taxes).
Effects of the differences between IFRS and US GAAP. In
September 2002, the International Accounting Standards Board
(IASB) and the US Financial Accounting Standards Board (FASB)
included a “Short-term Convergence” project in their project plan
with the goal of quickly eliminating a number of existing diver-
gences. In the long term, IASB and FASB continue to pursue the
goal of reducing or eliminating any remaining differences
through
joint projects and by coordinating future work programs.
In addition, it was agreed that the respective interpretation
committees would collaborate on convergence in terms of inter-
pretation and application. DaimlerChrysler supports the ongoing
convergence between IFRS and US GAAP. Although progress has
already been made on the way to achieving a substantial re-
duction in the differences between the two systems, significant
differences still exist. The number of differences between US
GAAP and IFRS with a significant impact on our consolidated finan-
cial statements is low, and primarily the following areas are
affected:
Additional Information | Transition to International Financial Reporting Standards (IFRS) | 211
Transition to International
Financial Reporting Standards (IFRS)