Porsche 2008 Annual Report Download - page 170

To our shareholders The Company
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Contingent liabilities
A contingent liability is a possible obligation to third parties that arises from past events and
whose existence will be confirmed only by the occurrence or non-occurrence of one or more un-
certain future events not wholly within the control of the Porsche group. A contingent liability may
also be a present obligation that arises from past events but is not recognized because an outflow
of resources is not probable or the amount of the obligation cannot be measured with sufficient
reliability.
Put options of minority interests
Where minority shareholders have put options on their interest, shares of the total profit of the
period attributable to minority interests as well as dividend payments to and withdrawals by minority
shareholders are presented as a change in equity. However as of the balance sheet date, a liability
needed to settle the option is recognized and the difference between this liability and the pro rata
equity of the minority shareholder is recognized in equity. Deferred taxes are recognized for tem-
porary differences for partnerships between the IFRS balance sheet carrying and the tax base
amount.
Significant accounting judgements and estimates
The preparation of consolidated financial statements requires certain judgements and estimates
that have an effect on recognition, measurement, presentation and disclosure of assets, liabilities,
income and expenses as well as contingent assets and liabilities. These judgement and estimates
reflect the current status of knowledge. Key sources of estimations are the measurement of the
impairment of intangible assets and property, plant and equipment, the determination of useful
lives and depreciation methods for fixed assets, the measurement of impairments and reversals of
impairments of associates and joint ventures, the measurement of derivative financial instruments,
the recoverability of receivables and the measurement of provisions. In individual cases, amounts
realized may differ from the estimates. The carrying amounts of the assets and liabilities affected
by estimates can be seen in the breakdowns of the individual balance sheet items.
The main issues requiring judgements are the classification of financial instruments, determining
the starting point for the recognition of development costs as an asset, the classification of leases
as operating or finance leases, deciding which indicators are indicative of an impairment of items
of property, plant and equipment, associates and joint ventures and the recognition of provisions.