Mercedes 2001 Annual Report Download - page 82

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78 Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
Basis of Presentation
1. Summary of Significant Accounting Policies
General – The consolidated financial statements of
DaimlerChrysler AG (“DaimlerChrysler” or the
“Group”) have been prepared in accordance with
Generally Accepted Accounting Principles in the
United States of America (“U.S. GAAP”). All amounts
herein are shown in euros and for the year 2001
amounts are also presented in U.S. dollars (“$”), the
latter being unaudited and presented solely for the
convenience of the reader at the rate of €1 = $0.8901,
the Noon Buying Rate of the Federal Reserve Bank of
New York on December 31, 2001.
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 also sig-
nificantly influenced by activities of the financial ser-
vices business. To enhance the readers’ understanding
of the Group’s consolidated financial statements, the ac-
companying financial statements present, in addition to
the consolidated financial statements, unaudited infor-
mation with respect to the financial position, results of
operations and cash flows of the Group’s industrial and
financial services 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 activities. Transactions between the Group’s
industrial and financial services business activities
principally represent intercompany sales of products,
intercompany borrowings and related interest,
and other support under special vehicle financing
programs. The effects of transactions between the
industrial and financial services businesses have been
eliminated within the industrial business columns.
Consolidation – All material companies in which
DaimlerChrysler has legal or effective control are
consolidated. Significant investments in which
DaimlerChrysler has 20% to 50% of the voting rights or
the ability to exercise significant influence over operat-
ing and financial policies (“associated companies”) are
accounted for using the equity method. The effects of
intercompany transactions have been eliminated.
For business combinations accounted for using
the purchase method, all assets acquired and liabilities
assumed are recorded at fair value at the date of
acquisition.
Foreign Currencies – The assets and liabilities of
foreign subsidiaries where the functional currency is
not the euro are generally translated using period-end
exchange rates while the statements of income (loss)
and the statements of cash flows are translated using
average exchange rates during the period. Differences
arising from the translation of assets and liabilities in
comparison with the translation of the previous period
are included as a separate component of stockholders’
equity.
The assets and liabilities of foreign subsidiaries
operating in highly inflationary economies are trans-
lated into euro on the basis of period-end rates for mon-
etary assets and liabilities and at historical rates for
non-monetary items, with resulting translation gains
and losses being recognized in earnings. Further, in
such economies, depreciation and gains and losses
from the disposal of non-monetary assets are deter-
mined using historical rates.
Due to the economic and political situation in
Argentina, assets and liabilities of Argentine subsidiar-
ies at December 31, 2001 were translated from Argen-
tine peso (“ARP”) into euro using the first subsequent
rate after the balance sheet date at which exchanges
could be made (€1 = ARP 1.498). In addition,
DaimlerChrysler recognized losses due to lower esti-
mated net realizable values of assets denominated in
Argentine peso and to remeasure foreign currency
assets and liabilities of Argentine subsidiaries. The
total pretax effect recognized in 2001 from these
adjustments amounted to €177 million.