Mercedes 2008 Annual Report Download - page 197

Consolidated Financial Statements |Notes to Consolidated Financial Statements |193
As previously reported, the U.S. Securities and Exchange Com-
mission (“SEC”) and the U.S. Department of Justice (“DOJ”) are
conducting an investigation into possible violations of law
by Daimler including the anti-bribery, record-keeping and internal
control provisions of the U.S. Foreign Corrupt Practices Act
(“FCPA”). Daimler has voluntarily shared with the DOJ and the
SEC information from its own internal investigation of certain
accounts, transactions and payments, primarily relating to trans-
actions involving government entities, and has provided the agen-
cies with information pursuant to outstanding subpoenas and
other requests. Daimler has also had communications
with and provided documents to the offices of German public
prosecutors regarding the matters that have been under investi-
gation by the DOJ and SEC.
Daimler has completed its internal investigation and has deter-
mined that in a number of jurisdictions, primarily in Africa, Asia
and Eastern Europe, improper payments were made which raise
concerns under the FCPA, under German law, and under the laws
of other jurisdictions. Daimler has taken various actions designed
to address and resolve the issues identified in the course of its
investigation to safeguard against the recurrence of improper
conduct. These include establishing a company-wide compliance
organization, evaluating and revising Daimler’s governance poli-
cies and internal control procedures and taking personnel
actions.
Daimler has been in discussions with the DOJ and SEC regarding
consensually revolving the agencies’ investigations. There can be
no assurance about whether and when settlements with the DOJ
or SEC will become final and effective.
Litigation is subject to many uncertainties and Daimler cannot pre-
dict the outcome of individual matters with assurance. The Group
establishes provisions in connection with pending or threatened
litigation if a loss is probable and can be reasonably estimated.
Since these provisions, which are reflected in the Group’s consol-
idated financial statements, represent estimates, it is reasonably
possible that the resolution of some of these matters could require
us to make payments in excess of the amounts accrued in an
amount or range of amounts that could not be reasonably estimat-
ed at December 31, 2008. It is also reasonably possible that
the resolution of some of the matters for which provisions could
not be made may require the Group to make payments in an
amount or range of amounts that could not be reasonably estimat-
ed at December 31, 2008. Although the final resolution of any
such matters could have a material effect on Daimler’s operating
results for a particular reporting period, Daimler believes that
it should not materially affect the Group’s financial position and
cash flow.
28. Guarantees and other financial commitments
Guarantees. The following table shows the amounts of provi-
sions and liabilities at December 31, which have been established
by the Group in connection with its issued guarantees (excluding
product warranties):
Financial guarantees. Financial guarantees principally represent
guarantees that require the Group to make certain payments if
companies in which the Group has a non-controlling equity interest
and third parties fail to meet their financial obligations. The
maximum potential obligation resulting from these guarantees
amounted to €1,857 million at December 31, 2008 (December 31,
2007: €2,340 million). Included in the 2008 and 2007 amounts
are guarantees, which the Group issued for the benefit of Chrysler
in connection with the transfer of a majority interest in the Chrys-
ler activities. These guarantees relate to Chrysler’s pension obliga-
tions and certain other financial obligations of Chrysler. For a
portion of these financial guarantees, Chrysler provided collateral
to an escrow account. For the amounts and further information
refer to Note 2.
Guarantees under buy-back commitments. Guarantees under
buy-back commitments represent arrangements whereby the
Group guarantees specified trade-in or resale values for sold vehi-
cles. Such guarantees provide the holder with the right to return
purchased vehicles to the Group, the right, being contingent on the
future purchase of vehicles or services. As of December 31, 2008,
the best estimate for obligations under these guarantees for which
no provisions had yet been recorded was €49 million (2007:
€34 million). Residual value guarantees related to arrangements
for which revenue recognition is precluded due to the Group’s
obligation to repurchase assets sold to unrelated guaranteed
parties are not included in those amounts.
Amount recognized
as a liability
At December 31,
20072008
218
381
156
755
262
62
132
456
Financial guarantees
Guarantees under buy-back commitments
Other guarantees
in millions of €