Mercedes 2008 Annual Report Download - page 153

Consolidated Financial Statements |Notes to Consolidated Financial Statements |149
In May 2008, the IASB published its omnibus standard for impro-
vements to IFRS. One of the improvements is that the presentation
of derecognition of assets held for rental is amended. The pro-
ceeds from the sale of assets held for rental in the course of
ordinary activities has to be recognized as revenue in accor-
dance with the amended IAS 16. Cash flows in conjunction with
these sales are shown under cash flows from operating activi-
ties in accordance with the amended IAS 7. Daimler will account
for these amendments beginning on January 1, 2009 and will
adjust prior years accordingly. As a result, revenue and cost of
sales have to be adjusted in the statements of income as well as
cash flows from operating activities and cash flows from investing
activities in the statements of cash flows. Other improvements in
the standard will be implemented as of the respective date of
effectiveness, as applicable.
IFRS issued but neither EU endorsed nor yet adopted. In Jan-
uary 2008, the IASB published revisions of IFRS 3 “Business
Combinations” and IAS 27 “Consolidated and Separate Financial
Statements.” Major changes are: (a) the requirement that the
assets acquired, the liabilities assumed and the equity interests
be consistently measured at fair value on the acquisition date;
(b) costs incurred in an acquisition are to be recognized in the
income statement of the period; (c) option of measuring any
non-controlling interest in the entity acquired at fair value; and
(d) once control is obtained all other increases and decreases
in ownership interest are reported in equity. Adoption of the stan-
dard is required prospectively for annual periods beginning on
or after July 1, 2009, with earlier adoption permitted. Currently,
Daimler does not intend to opt for early adoption of the standards.
Other IFRS issued but not required to be adopted are not ex-
pected to have significant influence on the Group’s financial posi-
tion, financial performance or cash flows.
Presentation. Presentation in the balance sheet differentiates
between current and non-current assets and liabilities. Assets
and liabilities are classified as current if they mature within one
year or within a longer operating cycle. Deferred tax assets
and liabilities as well as assets and provisions for pensions and
similar obligations are presented as non-current items. The
consolidated statement of income is presented using the cost-
of-sales method.
Commercial practices with respect to certain products manufac-
tured by the Group 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 the activities of its financial
services business.
To enhance the readers’ understanding of the Group’s consolidat-
ed financial statements, the accompanying financial statements
present, in addition to the audited consolidated financial state-
ments, unaudited information with respect to the results of
operations and financial position of the Group’s industrial and
financial services business activities. Such information, however,
is not required by IFRS and is not intended to, and does not rep-
resent the separate IFRS results of operations and financial
position of the Group’s industrial or financial services business
activities. Eliminations of the effects of transactions between
the industrial and financial services businesses have generally
been allocated to the industrial business columns.
Measurement. The consolidated financial statements have been
prepared on the historical cost basis with the exception of
certain items such as available-for-sale financial assets, deriva-
tive financial instruments or hedged items as well as pensions
and similar obligations. Measurement models applied to those
exceptions are described below.
Use of estimates and judgments. Preparation of the consoli-
dated financial statements requires management to make esti-
mates and judgments related to the reported amounts of assets
and liabilities and the disclosure of contingent assets and lia-
bilities at the date of the consolidated financial statements and
the reported amounts of revenue and expense for the period.
Significant items related to such estimates and judgments include
recoverability of investments in equipment on operating leas-
es, collectability of receivables from financial services, assump-
tions of future cash flows from cash-generating units or devel-
opment projects, recoverability of deferred tax assets, useful
lives of plant and equipment, warranty obligations, and assets
and obligations related to employee benefits. Actual amounts
could differ from those estimates.
For several years, the industrial business activities of Daimler
have been confronted with increasing worldwide competitive,
technological and regulatory pressure. In this environment, man-
agement of Daimler identified and initiated changes including
modification of its investment policies, procurement, develop-
ment and production processes, e.g. platform strategies and
the increasing use of identical parts and modules. In considera-
tion of those strategic decisions, Daimler examined their effects
on the use of its property, plant and equipment. Useful lives of
depreciable property, plant and equipment have been reassessed
and changed to reflect the changing business environment for
the years following 2006. In 2007, this reassessment of useful
lives led to an increase in profit before income taxes of €888
million (€556 million net of taxes and €0.54 per share). At that
time the estimated effects on the years 2008 and 2009
amounted to €708 million and €485 million before income taxes.
The effects of the change in estimates on net profit (loss)
from discontinued operations were not material.