Mercedes 2015 Annual Report Download - page 200

E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 207
The Group offers extended, separately priced warranties
for certain products. Revenue from these contracts is deferred
and recognized over the contract period in proportion to the
costs expected to be incurred based on historical information.
In circumstances in which there is insufficient historical infor-
mation, income from extended warranty contracts is recognized
on a straight-line basis. A loss on these contracts is recog-
nized in the current period if the sum of the expected costs
for services under the contract exceeds unearned revenue.
For multiple-element arrangements, such as when vehicles
are sold with free or reduced-in-price maintenance programs
or with free online services, the Group allocates revenue
to the various elements based on their estimated fair values.
Research and non-capitalized development costs
Expenditure for research and development that does not
meet the conditions for capitalization according to IAS 38
Intangible Assets is expensed as incurred.
Borrowing costs
Borrowing costs are expensed as incurred unless they
are directly attributable to the acquisition, construction or
production of a qualifying asset and are therefore part
of the cost of that asset. Depreciation of the capitalized
borrowing costs is presented within cost of sales.
Government grants
Government grants related to assets are deducted from
the carrying amount of the asset and are recognized in
earnings over the life of a depreciable asset as a reduced
depreciation expense. Government grants which compensate
the Group for expenses are recognized as other operating
income in the same period as the expenses themselves.
Profit/loss from equity-method investments
This item includes all income and expenses in connection
with investments accounted for using the equity method.
In addition to the prorated profits and losses from financial
investments, it also includes profits and losses resulting
from the sale of equity interests or the remeasurement of
equity interests following a loss of significant influence.
Daimler’s share of dilution gains and losses occurring if the
Group or other owners do not participate in capital increases
of companies in which shares are held and accounted for
using the equity method are also included in profit/loss from
equity-method investments. This item also includes losses
on the impairment of an investment’s carrying amounts and/or
gains on the reversal of such impairments.
Other financial income/expense, net
Other financial income/expense, net includes all income
and expense from financial transactions which are not included
in interest income and/or interest expense, and for Daimler
Financial Services are not included in revenue and/or cost of
sales. For example, expense from the compounding of interest
on provisions for other risks is recorded in this line item.
Furthermore, income and expenses from equity interests are
included in other financial income/expense, net, if such
income or expenses are not presented under equity-method
investments.
Interest income and interest expense
Interest income and interest expense include interest income
from investments in securities, cash and cash equivalents as
well as interest expense from liabilities. Furthermore, interest
and changes in fair values related to interest rate hedging
activities as well as income and expense resulting from the
allocation of premiums and discounts are included. The interest
components of defined benefit pension obligations and
other similar obligations as well as of the plan assets available
to cover these obligations are also presented in this line item.
An exception to the aforementioned principles is made
for Daimler Financial Services. In this case, interest income
and expense and gains or losses from derivative financial
instruments are disclosed under revenue and cost of sales
respectively.
Income taxes
Income taxes are comprised of current income taxes and
deferred taxes.
Current income taxes are calculated based on the respective
local taxable income and local tax rules for the period. In addition,
current income taxes presented for the period include adjust-
ments for uncertain tax payments or tax refunds for periods
not yet finally assessed including interest expense and penalties
on the underpayment of taxes. For the case that amounts
included in the tax return might not be realized (uncertain tax
positions), a provision for income taxes is recognized. The
amount is based on the best possible assessment of the expected
tax payment. Tax refund claims from uncertain tax positions
are recognized when it is predominantly likely and thus reason-
ably expected that they can be realized. Only in the case
of tax loss carryforwards or unused tax credits, no provision
for taxes or tax claim is recognized for these uncertain tax
positions. Instead, the deferred tax assets for the unused tax
loss carryforwards or tax credits are to be adjusted.
Changes in deferred tax assets and liabilities are generally
recognized through profit and loss in deferred taxes in the
consolidated statement of income, except for changes recognized
in other comprehensive income/loss or directly in equity.