Mercedes 2009 Annual Report Download - page 192

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Pensions and similar obligations. The measurement of defined
benefit plans for pensions and other post-employment benefits
(e.g. medical care) in accordance with IAS 19 Employee Benefits
is based on the projected unit credit method. For the valuation
of defined post-employment benefit plans, differences between
actuarial assumptions used and actual results and changes in
actuarial assumptions result in actuarial gains and losses, which
have to be amortized in future periods. Amortization of unrecog-
nized actuarial gains and losses arising after the transition to IFRS
on January 1, 2005 is recorded in accordance with the “corridor
approach.” This approach requires partial amortization of actuari-
al gains and losses in the following year with an effect on earn-
ings if the unrecognized gains and losses exceed 10 percent of
the greater of (1) the defined post-employment benefit obligation
or (2) the fair value of the plan assets. In such cases, the amount
of amortization recognized by the Group is the resulting excess
divided by the average remaining service period of active employ-
ees expected to receive benefits under the plan.
When the benefits of a plan are changed, the portion of the change
in benefit relating to past service by employees is recognized in
profit or loss on a straight-line basis over the average period until
the benefits become vested. To the extent that the benefits vest
immediately, the impact is recognized directly in profit or loss.
A negative net obligation arising from prepaid future contribu-
tions is only recognized as an asset to the extent that a cash
refund from the plan or reductions of future contributions to
the plan are available. Any exceeding amount is recognized in net
periodic pension costs in the period when it is incurred (“asset
ceiling”).
Provisions for other risks and contingent liabilities. A provi-
sion is recognized when a liability to third parties has been
incurred, an outflow of resources is probable and the amount of
the obligation can be reasonably estimated. In particular, restruc-
turing provisions are recognized when the Group has a detailed
formal plan that has either commenced implementation or been
announced. Provisions are regularly reviewed and adjusted as
further information develops or circumstances change.
The provision for expected warranty-related costs is established
when the product is sold, upon lease inception, or when a new
warranty program is initiated. Estimates for accrued warranty
costs are primarily based on historical experience.
Daimler records the fair value of an asset retirement obligation
from the period in which the obligation is incurred.
The restructuring provisions arise from planned programs that
materially change the scope of business performed by a segment
or business unit or the manner in which business is conducted.
In most cases, restructuring expenses include termination bene-
fits and compensation payments due to the termination of
agreements with suppliers and dealers.
Share-based payment. Share-based payment comprises cash-
settled liability awards and equity-settled equity awards.
The fair value of equity awards is generally determined by using
a modified Black-Scholes option pricing model at grant date and
represents the total payment expense to be recognized during
the service period with a corresponding increase in equity
(paid-in capital).
Liability awards are measured at fair value at each balance sheet
date until settlement and are classified as provisions. The
expense of the period comprises the addition to and the reversal
of the provision between two reporting dates and the dividend
equivalent paid during the period.
Presentation in the consolidated statements of cash flows.
Interest and taxes paid as well as interest and dividends received
are classified as cash provided by operating activities. Dividends
paid are shown in cash provided by (used for) financing activities.