Mercedes 1999 Annual Report Download - page 86

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
1. THE COMPANY AND THE MERGER
DaimlerChrysler AG (“DaimlerChrysler” or the “Group”) was
formed through the merger of Daimler-Benz Aktiengesellschaft
(“Daimler-Benz”) and Chrysler Corporation (“Chrysler”) in Novem-
ber 1998 (“Merger”). The consolidated financial statements of
DaimlerChrysler have been prepared in accordance with United
States Generally Accepted Accounting Principles (“U.S. GAAP”),
except that the Group accounts for certain joint ventures in accord-
ance with the proportionate method of consolidation (see Note 3).
Prior to December 31, 1998, DaimlerChrysler prepared and re-
ported its consolidated financial statements in Deutsche Marks
(“DM”). With the introduction of the euro (“€”) on January 1, 1999,
DaimlerChrysler has presented the accompanying consolidated fi-
nancial statements in euro. Accordingly, the Deutsche Mark con-
solidated financial statements for prior periods have been restated
into euro using the Official Fixed Conversion Rate of €1 =
DM1.95583. DaimlerChrysler’s 1998 and 1997 restated euro finan-
cial statements depict the same trends as would have been pre-
sented if it had continued to present its consolidated financial
statements in Deutsche Marks. The Group’s consolidated financial
statements will, however, not be comparable to the euro financial
statements of other companies that previously reported their finan-
cial information in a currency other than Deutsche Marks. All
amounts herein are shown in millions of euros and for the year
1999 are also presented in U.S. dollars (“$”), the latter being unau-
dited and presented solely for the convenience of the reader at the
rate of €1 = $1.0070, the Noon Buying Rate of the Federal Reserve
Bank of New York on December 31, 1999.
Pursuant to the amended and restated business combination
agreement dated May 7, 1998, 1.005 Ordinary Shares, no par value
(“DaimlerChrysler Ordinary Share”), of DaimlerChrysler were is-
sued for each outstanding Ordinary Share of Daimler-Benz and
.6235 DaimlerChrysler Ordinary Shares were issued for each out-
standing share of Chrysler common stock, stock options and per-
formance shares. DaimlerChrysler issued 1,001.7 million Ordinary
Shares in connection with these transactions.
The Merger was accounted for as a pooling of interests and accord-
ingly, the historical results of Daimler-Benz and Chrysler for 1998
and 1997 have been restated as if the companies had been com-
bined for all periods presented. In connection with the Merger,
€685 of merger costs (€401 after tax) were incurred and charged
to expense in 1998. These costs consisted primarily of fees for in-
vestment bankers, attorneys, accountants, financial printing, accel-
erated management compensation and other related charges.
Certain prior year balances have been reclassified to conform with
the Group’s current year presentation.
Commercial practices with respect to the products manufactured
by DaimlerChrysler necessitate that sales financing, including
leasing alternatives, be made available to the Group’s customers.
Accordingly, the Group’s consolidated financial statements are sig-
nificantly influenced by activities of the financial services busi-
nesses. To enhance the readers’ understanding of the Group’s con-
solidated financial statements, the accompanying financial state-
ments present, in addition to the consolidated financial statements,
information with respect to the financial position, results of opera-
tions and cash flows of the Group’s industrial and financial serv-
ices business activities. Such information, however, is not required
by U.S. GAAP and is not intended to, and does not represent the
separate U.S. GAAP financial position, results of operations or cash
flows of the Group’s industrial or financial services business ac-
tivities. Transactions between the Group’s industrial and financial
businesses principally represent intercompany sales of products,
intercompany borrowings and related interest, and other support
under special vehicle financing programs. The effects of transac-
tions between the industrial and financial services businesses
have been eliminated within the industrial business columns.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation – All material companies in which DaimlerChrysler
has legal or effective control are consolidated. Significant invest-
ments in which DaimlerChrysler has a 20% to 50% ownership (“as-
sociated companies”) are generally accounted for using the equity
method. For certain investments in joint ventures, DaimlerChrysler
uses the proportionate method of consolidation (see Note 3). All
other investments are accounted for at cost.
For business combinations accounted for under the purchase ac-
counting method, all assets acquired and liabilities assumed are
recorded at fair value. An excess of the purchase price over the fair
value of net assets acquired is capitalized as goodwill and amor-
tized over the estimated period of benefit on a straight-line basis.
The effects of intercompany transactions have been eliminated.
Foreign Currencies – The assets and liabilities of foreign subsidiar-
ies where the functional currency is other than the euro are gener-
ally translated using period-end exchange rates while the state-
ments of income are translated using average exchange rates dur-
ing the period. Differences arising from the translation of assets
and liabilities in comparison with the translation of the previous
periods are included as a separate component of stockholders’ eq-
uity.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS