Mercedes 1999 Annual Report Download - page 89

(in millions of €, except per share amounts)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
83
3. SCOPE OF CONSOLIDATION
Scope of Consolidation – DaimlerChrysler comprises 549 foreign
and domestic subsidiaries (1998: 481) and 16 joint ventures (1998:
82); the latter are generally accounted for on a pro rata basis. A to-
tal of 55 (1998: 27) subsidiaries are accounted for in the consoli-
dated financial statements using the equity method of accounting.
During 1999, 76 subsidiaries and 2 joint ventures were included in
the consolidated financial statements for the first time. A total of
69 subsidiaries and 7 joint ventures were no longer included in
the consolidated group. Significant effects of changes in the con-
solidated group on the consolidated balance sheets and the con-
solidated statements of income are explained further in the notes
to the consolidated financial statements. A total of 343 subsidiaries
(“affiliated companies”) are not consolidated as their combined in-
fluence on the financial position, results of operations, and cash
flows of the Group is not material (1998: 313). The effect of such
non-consolidated subsidiaries for all years presented on consoli-
dated assets, revenues and net income of DaimlerChrysler was ap-
proximately 1%. In addition, 7 (1998: 7) companies administering
pension funds whose assets are subject to restrictions have not
been included in the consolidated financial statements. The con-
solidated financial statements include 109 associated companies
(1998: 110) accounted for at cost and recorded under investments
in related companies as these companies are not material to the
respective presentation of the financial position, results of opera-
tions or cash flows of the Group.
Investment in Adtranz – In the first quarter of 1999,
DaimlerChrysler acquired the remaining outstanding shares of
Adtranz, a rail systems joint venture, from Asea Brown Boveri for
$472 (€441). The acquisition has been accounted for under the
purchase method of accounting. The purchase price has been allo-
cated to assets acquired and liabilities assumed based on their es-
timated fair values. This allocation resulted in goodwill of €100,
which will be amortized on a straight-line basis over 17 years.
Prior to the acquisition, the Group accounted for its investment in
Adtranz, including its 65 subsidiaries in 1998, using the propor-
tionate method of consolidation. Accordingly, the consolidated fi-
nancial statements of DaimlerChrysler as of December 31, 1998
and for the years ended December 31, 1998 and 1997 included
DaimlerChrysler’s 50% interest in the assets and liabilities, rev-
enues and expenses and cash flows of Adtranz.
Under U.S. GAAP, DaimlerChrysler’s investment in Adtranz was re-
quired to be accounted for using the equity method of accounting.
The differences in accounting treatment between the proportionate
and equity methods would not have affected reported stockholders’
equity or net income of DaimlerChrysler. Under the equity method
of accounting, DaimlerChrysler’s net investment in Adtranz would
have been included within investments in the balance sheet and
its share of the net loss of Adtranz together with the amortization
of the excess of the cost of its investment over its share of the
investment’s net assets would have been reported as part of finan-
cial income, net in the Group’s statement of income. Additionally,
Adtranz would have impacted the Group’s reported cash flows only
to the extent of the investing cash outflow in 1998 of €159 result-
ing from a capital contribution by DaimlerChrysler. For purposes
of its United States financial reporting obligation, DaimlerChrysler
has requested and received permission from the United States Se-
curities and Exchange Commission to prepare its consolidated fi-
nancial statements with this departure from U.S. GAAP.
In 1998, cash maturing within 3 months includes €30 (1997: €51)
held by DaimlerChrysler AG in connection with internal cash con-
centration procedures.
Revenues
Operating loss1)
Net loss
1) The operating losses for 1998 and 1997 include impairment charges on
goodwill of €64 and €61, respectively.
1997
Year ended December 31,
1,658 1,631
(322) (222)
(316) (154)
1998Statement of income information
Balance Sheet Information
At December 31,
Fixed assets1)
Non-fixed assets
Total assets
Stockholders’ equity
Minority interests
Accrued liabilities
Liabilities
Total liabilities and stockholders’ equity
728
842
1,570
385
7
542
636
1,570
1) Includes net goodwill resulting from the formation of Adtranz of €348.
1998
Cash flow information 1997
Year ended December 31,
Cash flows from:
Operating activities
Investing activities
Financing activities
Effect of foreign exchange on cash
Change in cash
(maturing within 3 months)
Cash (maturing within 3 months)
at beginning of period
Cash (maturing within 3 months)
at end of period
(130) 72
(84) (12)
161 (50)
(2) .
(55) 10
155 145
100 155
1998
Summarized consolidated financial information of Adtranz follows
as of December 31, 1998 and for the years ended December 31,
1998 and 1997. The amounts represent those used in the
DaimlerChrysler consolidation, including goodwill resulting from
the formation of Adtranz. Other companies included in the consoli-
dated financial statements according to the proportionate method
are not material.