Mercedes 2008 Annual Report Download - page 154

150
Risks and uncertainties. Daimler’s financial position, results of
operations and cash flows are subject to numerous risks and
uncertainties. For example, a downturn of the global economy
could cause actual results to vary from current expectations.
In particular, as a result of the current financial crisis and its
impact on the economy, significant risks exist regarding the
future development of the global economy. Additional parameters
which may cause actual results to differ from current expecta-
tions include further increases in overcapacity and the intensity
of competition in the automotive industry; dependence on
suppliers, especially single-source suppliers; fluctuations in cur-
rency exchange rates, interest rates and commodity prices;
the resolution of significant legal proceedings; and environmental
and other government regulations.
Principles of consolidation. The consolidated financial state-
ments include the financial statements of Daimler and, in gener-
al, the financial statements of Daimler’s subsidiaries, including
special purpose entities which are directly or indirectly controlled
by Daimler. Control means the power, directly or indirectly, to
govern the financial and operating policies of an entity so that
the Group obtains benefits from its activities.
The financial statements of consolidated subsidiaries are general-
ly prepared as of the balance sheet date of the consolidated
financial statements, except for Mitsubishi Fuso Truck and Bus
Corporation (MFTBC), a significant subgroup which is consoli-
dated with a one-month time lag. Adjustments are made for sig-
nificant events or transactions that occur during the time lag.
The financial statements of Daimler and its subsidiaries included
in the consolidated financial statements have been prepared
using uniform recognition and valuation principles. All significant
intercompany accounts and transactions relating to consoli-
dated subsidiaries and consolidated special purpose entities have
been eliminated.
Business combinations arising after the transition to IFRS on
January 1, 2005 are accounted for using the purchase method.
Daimler transfers in particular automotive finance receivables in
the ordinary course of business to special purpose entities.
According to IAS 27 “Consolidated and Separate Financial State-
ments” and the Standing Interpretations Committee (SIC)
Interpretation 12 “Consolidation – Special Purpose Entities,” those
special purpose entities have to be consolidated by the trans-
feror. The transferred financial assets remain on Daimler’s con-
solidated balance sheet.
Investments in associated companies and joint ventures.
Associated companies are equity investments in which Daimler
has the ability to exercise significant influence over the financial
and operating policies of the investee. Joint ventures are those
entities over whose activities Daimler has joint control with
partners, established by contractual agreement and requiring
unanimous consent for strategic financial and operating deci-
sions. Significant associated companies and joint ventures are
accounted for using the equity method.
The excess of the cost of Daimler’s initial investment in equity
method companies over the Group’s proportionate ownership
interest is recognized as investor level goodwill and included in
the carrying amount of the investment accounted for using the
equity method.
If the carrying amount exceeds the recoverable amount of an
investment in any associated company or joint venture, the carry-
ing amount of the investment has to be reduced to the recover-
able amount. The recoverable amount is the higher of fair value
less costs to sell and value in use. An impairment loss is recog-
nized in the income statement in the line item “share of profit
(loss) from companies accounted for using the equity method,
net.”
Profits from transactions with associated companies and joint
ventures are eliminated by reducing the carrying amount of the
investment.
For the investments in the European Aeronautic Defence and
Space Company EADS N.V. (EADS), Tognum AG (Tognum) and
Chrysler Holding LLC (Chrysler) the Group’s proportionate share
of the results of operations are included in Daimler’s consoli-
dated financial statements with a three-month time lag because
the financial statements of these associated companies are
not made available timely to Daimler. Adjustments are made for
all significant events or transactions that occur during the
time lag (see also Note 12).