Mercedes 2002 Annual Report Download - page 100

Notes to Consolidated Financial Statements
94 |Notes to Consolidated Financial Statements
Basis of Presentation
1. Summary of Significant Accounting Policies
General – The consolidated financial statements of Daimler-
Chrysler AG and subsidiaries (“DaimlerChrysler” or the
“Group”) have been prepared in accordance with Generally
Accepted Accounting Principles in the United States of Ameri-
ca (“U.S. GAAP”). All amounts herein are shown in euros and
for the year 2002 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 11 = $1.0485,
the Noon Buying Rate of the Federal Reserve Bank of New York
on December 31, 2002.
Certain amounts reported in previous years have been
reclassified to conform to the 2002 presentation.
Commercial practices with respect to certain products man-
ufactured 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 significantly influenced by activi-
ties of its financial services business. To enhance the readers’
understanding of the Group’s consolidated financial state-
ments, the accompanying financial statements present,
in addition to the audited consolidated financial statements,
unaudited information 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. Transac-
tions 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.
Use of Estimates – Preparation of the financial statements
requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
DaimlerChrysler’s financial position, results of operations,
and cash flows are subject to numerous risks and uncertainties.
Factors that could affect DaimlerChrysler’s future financial
statements and cause actual results to vary materially from
expectations include, but are not limited to, further adverse
changes in global economic conditions; overcapacity and intense
competition in the automotive industry; the concentrations
of DaimlerChrysler’s revenues derived from the United States
and Western Europe; the significant portion of Daimler-
Chrysler’s workforce subject to a collective bargaining agree-
ment; fluctuations in currency exchange rates and interest
rates; significant legal proceedings and environmental and
other government regulations.
Principles of Consolidation – The accompanying consolidated
financial statements include the financial statements
of DaimlerChrysler AG and all of its material, majority-owned
subsidiaries. All significant intercompany transactions and
balances relating to these majority-owned entities have been
eliminated.
Investments in Associated Companies – Significant invest-
ments in which DaimlerChrysler has 20% to 50% of the voting
rights or the ability to exercise significant influence over the
operating and financial policies of the investee (“associated
companies”) such as the European Aeronautic Defence and
Space Company EADS N.V. (“EADS”) and Mitsubishi Motors
Corporation (“MMC”) are accounted for using the equity
method. Because the financial statements of EADS and MMC
are not made available timely to DaimlerChrysler in order to
apply the equity method of accounting, the Group’s propor-
tionate share of the results of operations of these associated
companies are included in DaimlerChrysler’s consolidated
financial statements on a three month lag. An impairment loss
on its investment in an associated company is recognized
when the loss in value of the investment is determined to be
other than temporary.
Foreign Currencies – The assets and liabilities of foreign
operations 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
respective periods. The resulting translation adjustments
are recorded as a separate component of accumulated other
comprehensive income (loss).
The assets and liabilities of foreign operations in highly
inflationary economies are translated into euro on the basis of
period-end rates for monetary assets and liabilities and at his-
torical rates for non-monetary items, with resulting translation
gains and losses recognized in earnings. Further, in such eco-
nomies, depreciation and gains and losses from the disposal
of non-monetary assets are determined using historical rates.
Due to the economic and political situation in Argentina,
assets and liabilities of Argentine subsidiaries at December
31, 2001 were translated from Argentine peso (“ARP”) into
euro using the first subsequent rate after the balance sheet
date at which exchanges could be made (11 = ARP 1.498).