Mercedes 2008 Annual Report Download - page 156

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Other financial income (expense), net. Other financial income
(expense), net includes income and expense from financial
transactions which are not included under interest expense, net,
e.g. expense from the compounding of interest on provisions
for other risks.
Gains and losses resulting from the issuance of stock by a Group
subsidiary to third parties that reduces Daimler’s percentage
ownership (“dilution gains and losses”) and Daimler’s share of
any dilution gains and losses reported by its investees accounted
for under the equity method are recognized in other financial
income (expense), net, or in share of profit (loss) from companies
accounted for using the equity method, net.
Income taxes. Current income taxes are determined based on
respective local taxable income of the period and tax rules.
In addition, current income taxes include adjustments for uncer-
tain tax payments or tax refunds for periods not yet assessed
as well as interest expense and penalties on the underpayment
of taxes. Deferred tax is included in income tax expense and
reflects the changes in deferred tax assets and liabilities except
for changes recognized directly in equity.
Deferred tax assets or liabilities are determined based on tempo-
rary differences between financial reporting and the tax basis
of assets and liabilities including differences from consolidation,
loss carry-forwards and tax credits. Measurement takes place
on the basis of the tax rates whose effectiveness is expected for
the period in which an asset is realized or a liability is settled.
For this purpose, the tax rates and tax rules are used which have
been enacted or substantively enacted at the balance sheet
date. Deferred tax assets are recognized to the extent that tax-
able profit at the level of the relevant tax authority will be
available for the utilization of the deductible temporary differ-
ences. Daimler recognizes a valuation allowance for deferred
tax assets when it is unlikely that a respective amount of future
taxable profit will be available or when Daimler has no control
over the tax advantage.
Tax benefits resulting from uncertain income tax positions are
recognized at the best estimate of the tax amount expected to be
paid.
Discontinued operations. The operating activities of Chrysler
including the related financial services business in North America
until August 3, 2007, the result from the deconsolidation of the
Chrysler activities and adjustments of this result are presented
as discontinued operations in the Group’s statements of income
(see Note 2).
Earnings (loss) per share. Basic earnings (loss) per share are
calculated by dividing profit or loss attributable to shareholders
of Daimler by the weighted average number of shares out-
standing. Diluted earnings per share additionally reflect the
potential dilution that would occur if all securities and other
contracts to issue ordinary shares were exercised or converted.
Goodwill. For acquisitions consummated after the transition to
IFRS on January 1, 2005, goodwill represents the excess of the
cost of an acquired business over the fair values assigned to the
separately identifiable assets acquired and the liabilities
assumed. The purchase of minority rights is treated in the same
manner. In the case of an adjustment for contingent considera-
tion, such amount is included in goodwill.
Other intangible assets. Intangible assets acquired are mea-
sured at cost less accumulated amortization. If necessary accu-
mulated impairment losses will be recognized. Intangible assets
with indefinite lives are reviewed annually to determine whether
indefinite-life assessment continues to be supportable. If not,
the change in the useful-life assessment from indefinite to finite
is made on a prospective basis.
Intangible assets other than development costs with finite useful
lives are generally amortized on a straight-line basis over their
useful lives (3 to 10 years) and are reviewed for impairment when-
ever there is an indication that the intangible asset may be im-
paired. The amortization period for intangible assets with finite
useful lives is reviewed at least at each year-end. Changes in
expected useful lives are treated as changes in accounting esti-
mates. The amortization expense on intangible assets with
finite useful lives is recorded in functional costs.
Development costs are recognized if the conditions for capitaliza-
tion according to IAS 38 are met. Subsequent to initial recogni-
tion, the asset is carried at cost less accumulated amortization
and accumulated impairment losses. Capitalized development
costs include all direct costs and allocable overheads and are
amortized over the expected product life cycle (2 to 10 years).
Amortization of capitalized development costs is an element of
the manufacturing costs allocated to those vehicles and compo-
nents by which they have been generated and is included in cost
of sales when the inventory is sold.