Porsche 2008 Annual Report Download - page 169

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Liabilities
Non-current liabilities are carried at amortized cost in the balance sheet. Differences between their
historical cost and their repayment amount are accounted for using the effective interest method.
Current liabilities are recognized at their repayment or settlement value.
Revenue and expenses
Revenue is generally recognized to the extent that it is probable that the economic benefits will
flow to the group and the revenue can be reliably measured.
Revenue from the sale of products is generally not recognized until the point in time when the
significant opportunities and risks associated with ownership of the goods and products being sold
are transferred to the buyer. Revenue is reported net of discounts, customer bonuses and rebates.
Income from assets for which a group entity has a buy-back obligation cannot be realized until the
assets have definitely left the group. If a fixed repurchase price was agreed when the contract was
concluded, the difference between the selling and repurchase price is recognized as income rata-
bly over the term of the contract. Prior to that time, the assets are accounted for as inventories.
Revenue from receivables from financial services is realized using the effective interest method.
Revenue is generally recorded separately for each business transaction. If two or more transac-
tions are linked in such a way that the commercial effect cannot be understood without reference
to the series of transactions as a whole, the criteria for revenue recognition are applied to these
transactions as a whole. If, for example, loans in the financial services sector are issued at below
market interest rates to promote sales of new vehicles, revenue is reduced by the incentive arising
from the loan.
In case of long-term development contracts revenue is recognized in accordance with the percent-
age of completion method.
Interest income is recognized when interest accrues.
Dividend income is recognized when the group’s right to receive the payment is established.
Production-related expenses are recognized upon delivery or utilization of the service, while all
other expenses are recognized as an expense as incurred. The same applies for development
costs not eligible for recognition.
Provisions for warranty claims are recognized upon sale of the related products. Interest expenses
incurred for financial services are presented as cost of materials.