Mercedes 2001 Annual Report Download - page 87

Notes to Consolidated Financial Statements 83
In August 2001, the FASB issued SFAS 144, “Ac-
counting for the Impairment or Disposal of Long-Lived
Assets.” SFAS 144 retains the current requirement to
recognize an impairment loss only if the carrying
amounts of long-lived assets to be held and used are
not recoverable from their expected undiscounted
future cash flows. However, goodwill is no longer
required to be allocated to these long-lived assets when
determining their carrying amounts. SFAS 144 requires
that a long-lived asset to be abandoned, exchanged for
a similar productive asset, or distributed to owners
in a spin-off be considered held and used until it is
disposed. SFAS 144 requires the depreciable life
of an asset to be abandoned be revised. SFAS 144
requires all long-lived assets to be disposed of by sale
be recorded at the lower of its carrying amount or fair
value less cost to sell and to cease depreciation (amorti-
zation). Therefore, discontinued operations are no
longer measured on a net realizable value basis, and
future operating losses are no longer recognized before
they occur. SFAS 144 is effective January 1, 2002. The
adoption of SFAS 144 is not expected to have a material
impact on the Group’s financial statements.
2. Scope of Consolidation
Scope of Consolidation – DaimlerChrysler comprises
470 German and non-German subsidiaries (2000: 485)
and 1 joint venture (2000: 1). A total of 102 (2000: 108)
companies are accounted for in the consolidated finan-
cial statements using the equity method of accounting.
During 2001, 98 subsidiaries were included in the con-
solidated financial statements for the first time. A total
of 113 subsidiaries were no longer included in the con-
solidated group. Significant effects of changes in the
consolidated group on the consolidated balance sheets
and the consolidated statements of income (loss) are
explained further in the notes to the consolidated finan-
cial statements. A total of 296 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 (2000: 255).
The effect of such non-consolidated subsidiaries for all
years presented on consolidated assets, revenues and
net income (loss) of DaimlerChrysler was approxi-
mately 1%. In addition, 5 (2000: 6) companies adminis-
tering pension funds whose assets are subject to
restrictions have not been included in the consolidated
financial statements. The consolidated financial state-
ments include 96 associated companies (2000: 74) ac-
counted 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 operations or cash flows of the Group.
3. Equity Method Investments
At December 31, 2001, the significant investments in
companies accounted for under the equity method were
the following:
European Aeronautic Defence and Space
Company EADS N.V. (“EADS”)
Mitsubishi Motors Corporation (“MMC”)
Ownership
percentage
33.0%
37.3%
Company
Further information with respect to the transac-
tions which resulted in the Group’s holdings in EADS
and MMC is presented in Note 4 (Acquisitions and Dis-
positions) and Note 11 (Extraordinary Items). The aggre-
gate quoted market prices as of December 31, 2001, for
DaimlerChrysler’s shares in EADS and MMC were
€3,637 million and €1,056 million, respectively.
The carrying value of the significant investments
exceeded DaimlerChrysler’s share of the underlying
reported net assets by approximately €1,049 million at
December 31, 2001. The excess of the Group’s initial
investment in equity method companies over the
Group’s ownership percentage in the underlying net
assets of those companies is attributed to fair value ad-
justments, if any, with the remaining portion classified
as goodwill. The fair value adjustments and goodwill
are accounted for in the respective equity method
investment balances. Under the equity method, invest-
ments are stated at initial cost and are adjusted for sub-
sequent contributions and DaimlerChrysler’s share of
earnings, losses and distributions. Because the finan-
cial statements of EADS and MMC are not available
sufficiently timely for the Group to apply the equity
method currently, DaimlerChrysler’s share of the
earnings or losses of EADS and MMC are recorded on
a three month lag. Goodwill relating to the Group’s in-
vestments in EADS and MMC was being amortized us-
ing an useful life of 20 years until December 31, 2001.
After December 31, 2001, such goodwill will no longer
be amortized as a result of adopting SFAS 142. The
total investment, including goodwill, will continue to
be evaluated for impairment when conditions indicate
that a decline in fair value below the carrying amount
is other than temporary.