Mercedes 2015 Annual Report Download - page 203

210 E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Impairment of non-current non-financial assets
Daimler assesses at each reporting date whether there is an
indication that an asset may be impaired. If such indication
exists, Daimler estimates the recoverable amount of the asset.
The recoverable amount is determined for each individual
asset unless the asset generates cash inflows that are not
largely independent of those from other assets or groups
of assets (cash-generating units). In addition, goodwill and
other intangible assets with indefinite useful lives are tested
annually for impairment; this takes place at the level of the
cash-generating units. If the carrying amount of an asset
or of a cash-generating unit exceeds the recoverable amount,
an impairment loss is recognized for the difference.
The recoverable amount is the higher of fair value less costs
of disposal and value in use. For cash-generating units, which
at Daimler correspond to the reportable segments, Daimler
in a first step determines the respective recoverable amount
as value in use and compares it with the respective carrying
amount (including goodwill). Value in use is measured by discount-
ing expected future cash flows from the continuing use of
the cash-generating units using a risk-adjusted interest rate.
Future cash flows are determined on the basis of the long-term
planning, which is approved by the Board of Management
and which is valid at the date when the impairment test is con-
ducted. This planning is based on expectations regarding
future market share, the growth of the respective markets as
well as the products’ profitability. The multi-year planning
comprises a planning horizon until 2022 and therefore mainly
covers the product life cycles of our automotive business.
The rounded risk-adjusted interest rates used to discount cash
flows, which are calculated for each segment, are currently
unchanged from the previous year at 8% after taxes for the cash-
generating units of the industrial business and 9% after taxes
for Daimler Financial Services. Whereas the discount rate for
Daimler Financial Services represents the cost of equity,
the risk-adjusted interest rate for the cash-generating units
of the industrial business is based on the weighted average
cost of capital (WACC). These are calculated based on the capital
asset pricing model (CAPM) taking into account current
market expectations. In calculating the risk-adjusted interest
rate for impairment test purposes, specific peer group infor-
mation for beta factors, capital structure data and cost of debt
are used. Periods not covered by the forecast are taken into
account by recognizing a residual value (terminal value), which
generally does not consider any growth rates. In addition,
several sensitivity analyses are conducted. These show that
even in case of more unfavorable premises for main influenc-
ing factors with respect to the original planning, no need
for impairment exists. If value in use is lower than the carrying
amount, fair value less costs of disposal is additionally
calculated to determine the recoverable amount.
An assessment for assets other than goodwill is made at each
reporting date as to whether there is any indication that
previously recognized impairment losses may no longer exist
or may have decreased. If this is the case, Daimler records
a partial or entire reversal of the impairment; the carrying amount
is thereby increased to its recoverable amount. However,
the increased carrying amount may not exceed the carrying
amount that would have been determined (net of depreciation)
had no impairment loss been recognized in prior years.
Non-current assets held for sale and disposal groups
The Group classifies non-current assets or disposal groups
as held for sale if the conditions of IFRS 5 Non-current assets
held for sale and discontinued operations are fulfilled. In this
case, the assets or disposal groups are no longer depreciated
but measured at the lower of carrying amount and fair value
less costs to sell. If fair value less costs to sell subsequently
increases, any impairment loss previously recognized is
reversed, this reversal is restricted to the impairment loss
previously recognized for the assets or disposal group
concerned. The Group generally discloses these assets or
disposal groups separately in the consolidated statement
of financial position.
Inventories
Inventories are measured at the lower of acquisition or
manufacturing cost and net realizable value. The net realizable
value is the estimated selling price less any remaining costs
to sell. The acquisition or manufacturing costs of inventories
are generally based on the specific identification method and
include costs incurred in acquiring the inventories and bringing
them to their existing location and condition. Costs for large
numbers of inventories that are interchangeable are allocated
under the average cost formula. In the case of manu factured
inventories and work in progress, acquisition or manufacturing
cost also includes production overheads based
on normal capacity.
Financial instruments
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity. Financial instruments in the
form of financial assets and financial liabilities are generally
presented separately. Financial instruments are recognized
as soon as Daimler becomes a party to the contractual provi-
sions of the financial instrument. In the case of purchases
or sales of financial assets through the regular market, Daimler
uses the transaction date as the date of initial recognition
or derecognition.