Chrysler 2010 Annual Report Download - page 165

FIAT GROUP
CONSOLIDATED
FINANCIAL
STATEMENTS
AT 31 DECEMBER
2010
NOTES
164
Accounting principles, amendments and interpretations adopted from 1 January 2010
The Group adopted the following standards, amendments and interpretations from 1 January 2010.
IFRS 3 (2008) – Business Combinations
In accordance with the transitional provision of the Standard the Group adopted IFRS 3 (revised in 2008) – Business
Combinations, prospectively, to business combinations for which the acquisition date is on or after 1 January 2010. The
main changes to IFRS 3 concern the accounting treatment of step acquisition, the possibility of measuring the non-controlling
interests in a partial acquisition either at either fair value or the non-controlling interest’s share of the fair value of the identifiable
net assets of the acquiree, the recognition of acquisition-related costs as period expenses and the recognition at the acquisition
date of any contingent consideration included in the arrangements.
Step acquisitions of a subsidiary
In the case of step acquisitions IFRS 3 (2008) states that a business combination occurs only in respect of the transaction that
gives one entity control of another. At that time, the identifiable net assets of the acquiree are measured at fair value and any
non-controlling interest is measured either at fair value or at the non-controlling interest’s proportionate share of the fair value of
the acquiree’s identifiable net assets (a method already permitted under the previous version of IFRS 3).
An equity interest previously held in the acquiree and accounted for under IAS 39 – Financial Instruments: Recognition and
Measurement, or under IAS 28 – Investments in Associates, or under IAS 31 – Interests in Joint Ventures is treated as if it were
disposed of and acquired at fair value at the acquisition date. Accordingly, it is remeasured to its acquisition date fair value
and any resulting gain or loss is recognised in profit or loss. Moreover, any changes in the value of the equity interest that were
previously recognised in Other comprehensive income are reclassified from equity to profit or loss as if they had been disposed
of. Goodwill, or the gain from a bargain purchase, arising from the acquisition of control in a subsidiary is measured as the
consideration transferred to obtain control, plus the amount of non-controlling interest (using either option), plus the fair value of
previously held non-controlling equity interest, less the fair value of the identifiable net assets of the acquiree.
Under the previous version of the standard controlling interests achieved in stages were dealt with as a series of separate
transactions with goodwill recognised as the sum of the goodwill arising on these transactions.
As described in the Scope of consolidation section below on 30 June 2010 the Fiat Group acquired the remaining 50% of the
joint venture Fiat GM Powertrain Polska (an investment that had been accounted for in the Fiat Group’s consolidated financial
statements using proportionate consolidation), thereby obtaining 100% control. The Group accounted for this transaction as
the step acquisition of a subsidiary.
Acquisition-related costs
Under IFRS 3 (2008) acquisition-related costs are recognised as an expense in the periods in which the costs are incurred.
Under the previous version of the Standard, these costs were included in the acquisition cost of the net assets of the acquired
entity. Applying this change to the acquisition of the remaining 50% interest in Fiat GM Powertrain Polska in 2010 led to the
recognition of acquisition related costs whose amount is not significant.
Recognition of contingent consideration
Under IFRS 3 (2008) contingent consideration is recognised as part of the consideration transferred in exchange for the
acquiree’s net assets, measured at its acquisition date fair value. Similarly, where the purchase agreement includes a right to
the return of previously-transferred consideration if specified conditions are met, that right to return is classified as an asset by
the acquirer. Subsequent changes in this fair value are recognised as adjustments to the original accounting for the acquisition if
they from additional information obtained by the acquirer and occur within 12 months of the acquisition date. All other changes
in the fair value of the contingent consideration are recognised in profit or loss.
Under the previous version of the Standard contingent consideration was recognised at the acquisition date only if payment was
probable and it could be measured reliably. Any subsequent adjustments to contingent consideration were recognised against
goodwill. No effects arose from this change in accounting standard as far as the acquisition of the remaining 50% of the joint
venture Fiat GM Powertrain Polska in 2010 is concerned.