Mercedes 2008 Annual Report Download - page 175

Consolidated Financial Statements |Notes to Consolidated Financial Statements |171
The transactions contracted in July 2004 and April 2006 reduced
the Group’s legal ownership in EADS to 22.5%. Until the respective
settlements of the transactions (the forward transaction in Jan-
uary 2007 with respect to a 7.5% equity interest in EADS and
exercise of the option rights, beginning in the fourth quarter
of 2007, with respect to an approximate 3% equity interest in EADS),
however, the original transactions did not meet the criteria of
a sale. Therefore, for the period up to derecognition, the Group
carried the EADS shares underlying these transactions as an
investment on the balance sheet. Accordingly, Daimler’s share in
the results of EADS in 2008 was based on an equity interest
which declined during the year from 24.9% to 22.5% at year end.
In 2007 and 2006, however, the at-equity accounting for the
Group’s interest in EADS was based on a 24.9% and 33% equity
interest, respectively. We accounted for all derivatives relating
to EADS shares as derivative financial instruments with changes
in fair value subsequent to initial measurement through the set-
tlement of the respective contracts recognized in other financial
income (expense), net. In 2007 and 2006, the mark-to-market valu-
ations of these derivatives resulted in unrealized gains of €72
million and €519 million, respectively.
On March 13, 2007, a subsidiary of Daimler which holds Daimler’s
22.5% interest in EADS issued equity interests to investors in
exchange for €1,554 million of cash, resulting in a gain of €704
million before income taxes in 2007. The newly issued equity
interest can be converted by Daimler on or after July 1, 2010 into
a 7.5% interest in EADS or into cash equal to the then fair value
of that interest in EADS. This transaction did not reduce Daimler’s
equity interest in EADS on which the Group bases its at-equity
accounting. As a result of this transaction, the Group reports
a minority interest in its consolidated balance sheet representing
the investor’s ownership in the consolidated subsidiary that issued
the equity interest. The amount reported as minority interest
reflects the investor’s 33% share in the net assets of that sub-
sidiary.
Daimler’s equity in the income (or loss) of EADS was €177 million
in 2008 (2007: €13 million; 2006: €(193) million), including
investor-level adjustments. The 2006 result is based on financial
information of EADS with a three-month time lag adjusted for sig-
nificant transactions and events during the intervening period
between September 30, 2006 and the Group’s reporting date of
December 31, 2006. The adjustments primarily comprise charges
recorded by EADS in the fourth quarter of 2006 in connection
with the A380 aircraft program due to delivery delays and the deci-
sion to launch the industrial program for the new A350XWB air-
craft family.
The following table presents summarized IFRS financial informa-
tion for EADS, which was the basis for applying the equity
method in the Group’s consolidated financial statements:
Chrysler. Daimler holds a 19.9% equity interest in Chrysler.
The Group’s significant influence on Chrysler is the result of its
representation on Chrysler’s board of directors and the veto
and blocking rights set forth in the partnership agreement.
In 2008, Daimler’s proportionate share in the loss of Chrysler
amounted to €1,390 million, including investor-level adjustments
(2007: for the period from August 4 until September 30, €377
million). The Group’s proportionate share in Chrysler’s 2008 loss
reduced the carrying amount of its equity investment to zero
(carrying amount at December 31, 2007: €916 million).
The amount of the proportionate share in the 2008 loss which
exceeded the carrying amount of the equity investment in
Chrysler was recorded as a reduction of the carrying amounts
of the subordinated loans granted to Chrysler (see Note 2). The
results for 2008 and 2007 are based on financial information
of Chrysler as of September 30, included with a three-month
time lag and adjusted for significant transactions and events that
occurred between September 30 and the Group’s reporting
date of December 31. The adjustments made in 2008 contain
expenses of €109 million relating to restructuring measures initi-
ated at Chrysler. In 2007, the adjustments comprised expenses
of €322 million related to restructuring measures at Chrysler and a
new agreement Chrysler reached with the US trade union, UAW.
200620072008
40,659
1,176
73,071
12,690
60,381
38,109
(585)
68,428
13,138
55,290
39,614
(1)
68,482
13,760
54,722
Income statement information 1
Sales
Net profit (loss)
Balance sheet information 2
Total assets
Equity
Liabilities
1 For the period from October 1 to September 30; adjusted for significant transactions
and events during fourth quarter of 2006.
2 As of the balance sheet date September 30; adjusted for significant transactions
and events during fourth quarter of 2006.
in millions of €