Mercedes 2008 Annual Report Download - page 174

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Assets subject to operating leases which are purchased by Daimler
Financial Services from independent third parties and leased to
customers are considered non-inventory related assets. In contrast,
assets subject to a sale under which the Group guarantees the
minimum resale value or assets which Daimler leases directly as
manufacturer are considered inventory related assets, which
are reclassified from inventories to equipment on operating leases
on conclusion of an arrangement. Since this is not treated as
sale, the manufacturer profit on these vehicles is not recognized
on conclusion of the arrangement. Cash flows from the purchase
or sale of non-inventory related assets are presented as investing
activities within the consolidated statements of cash flows.
In contrast, cash flow effects attributable to inventory related
leased assets are presented as operating activities.
In 2008, as a result of lower estimated residual values of leased
vehicles in light of the worsening global economy, the Group
recorded impairment charges of €465 million in cost of sales and
allocated these charges to the Mercedes-Benz Cars segment.
The impairment charges are included in the line item “Additions”
within “Depreciation” in the table above.
Minimum lease payments. Non-cancelable future lease pay-
ments to Daimler for equipment on operating leases are
due as follows:
12. Investments accounted for using the equity method
The European Aeronautic Defence and Space Company EADS N.V.
(EADS) and Chrysler Holding LLC (Chrysler) are the most signi-
ficant investees accounted for under the equity method. The Group
principally includes its proportionate share in the income (loss)
of these companies with a time lag of three months and allocates
the results to Vans, Buses, Other. Daimler’s equity share in the
income (loss) of these investments is shown in the Group’s conso-
lidated statements of income within “Share of profit (loss) from
companies accounted for using the equity method, net.”
EADS. The carrying amount of Daimler’s investment in EADS
at December 31, 2008 and 2007 was €2,886 million (based on
a 22.5% equity interest) and €3,442 million (based on a 24.9%
equity interest), respectively. At December 31, 2008, the market
value of Daimler’s investment in EADS based on quoted market
prices was €2,206 million.
On July 7, 2004, Daimler entered into a securities lending agree-
ment with Deutsche Bank AG concerning an approximate 3%
equity interest in EADS shares. The securities lending had several
tranches with terms ranging between three and four years.
As collateral, Daimler received a lien on a securities account of
equivalent value to the shares loaned by Daimler. Simultane-
ously the Group also entered into option contracts based on EADS
shares which provided it with the rights to sell these EADS
shares between October 2007 and October 2008 at a fixed strike
price but gave the counterparty the right to participate in increases
in the share price above a certain higher threshold while obtain-
ing protection against a decrease in the share price below
a minimum amount per share. In the fourth quarter of 2007, the
Group started to exercise its option contracts and irrevocably
transferred an approximately 1% equity interest in EADS to third
parties. From this transaction, Daimler achieved a gain of
€35 million before income taxes. In 2008, the Group exercised all
remaining option rights and irrevocably transferred an equity
interest of approximately 2% in EADS to third parties. From this
transaction, Daimler realized a gain of €130 million before
income taxes.
In addition, on April 4, 2006, Daimler entered into a forward
transaction with several financial institutions pertaining to a 7.5%
interest in EADS. Simultaneously, Daimler entered into a securi-
ties lending agreement with those financial institutions for the same
number of shares of EADS. As collateral, Daimler received a lien
on a securities account of equivalent value to the shares loaned
by Daimler. In January 2007, Daimler settled the forward trans-
action by transferring its 7.5% interest in EADS for cash proceeds
of €1,994 million and realized a gain of €762 million before in-
come taxes (including a gain from the realization of derivatives of
€49 million).
At December 31,
2007
2008
3,682
3,670
53
7,405
3,627
3,785
49
7,461
Maturity
within one year
between one and five years
later than 5 years
in millions of €