Mercedes 2002 Annual Report Download - page 103

Notes to Consolidated Financial Statements |97
Pension and Other Post Retirement Plans – The measure-
ment of pension and postretirement benefit liabilities is based
upon the projected unit credit method in accordance with
SFAS 87, “Employers’ Accounting for Pensions,” and SFAS
106, “Employers’ Accounting for Postretirement Benefits Oth-
er Than Pensions,” respectively. As permitted under SFAS 87
and SFAS 106, changes in the amount of either the projected
benefit obligation (for pension plans), the accumulated benefit
obligation (for other postretirement plans) or plan assets
resulting from experience different from that assumed and
from changes in assumptions can result in gains and losses
not yet recognized in the Group’s consolidated financial state-
ments. The expected return on plan assets is determined
based on the expected long-term rate of return on plan assets
and the fair value or market-related value of plan assets.
Amortization of an unrecognized net gain or loss is included as
a component of the Group’s net periodic benefit plan cost for
a year if, as of the beginning of the year, that unrecognized
net gain or loss exceeds 10 percent of the greater of 1) the
projected benefit obligation (for pension plans) or the accumu-
lated postretirement benefit obligation (for other postretire-
ment plans) or 2) the fair value or market-related value of that
plan’s assets. In such case, the amount of amortization
recognized by the Group is the resulting excess divided by the
average remaining service period of active employees expected
to receive benefits under the plan (see Note 25a).
Earnings Per Share – Basic earnings per share is calculated
by dividing net income by the weighted average number of
shares outstanding. Diluted earnings per share reflects the
potential dilution that would occur if all securities and other
contracts to issue Ordinary Shares were exercised or con-
verted (see Note 35). Net income represents the earnings of
the Group after minority interests.
Intangible Assets – Purchased intangible assets, other than
goodwill, with a definite useful life, are valued at acquisition
cost and are amortized over their respective useful lives
(2 to 10 years) on a straight-line basis. Goodwill and intangible
assets with an indefinite useful life are no longer amortized as
a result of the adoption of SFAS 142, “Goodwill and Other
Intangible Assets” in 2002 (see New Accounting Pronounce-
ments). The Group now evaluates the recoverability of its
goodwill at least annually or when significant events occur or
there are changes in circumstances that indicate the fair value
of a reporting unit of the Group is less than its carrying value.
The Group determines the fair value of each of its reporting
units by estimating the present value based on cash flows.
Prior to the adoption of SFAS 142, goodwill derived from acquisi-
tions that were completed before July 1, 2001, was capitalized
and amortized over 3 to 40 years. Goodwill acquired in busi-
ness combinations after June 30, 2001, and intangible assets
with an indefinite useful life acquired after June 30, 2001,
were not amortized in accordance with SFAS 142. Goodwill
acquired in business combinations that were completed
before July 1, 2001, and intangible assets with an indefinite
useful life acquired before July 1, 2001, were amortized until
December 31, 2001.
Property, Plant and Equipment – Property, plant and equip-
ment is valued at acquisition or manufacturing costs less
accumulated depreciation. Depreciation expense is recognized
using either the declining balance method until the straight-
line method yields larger expenses or the straight-line method.
The costs of internally produced equipment and facilities
include all direct costs and allocable manufacturing overhead.
Costs of the construction of certain long-term assets include
capitalized interest, which is amortized over the estimated
useful life of the related asset. The following useful lives are
assumed: buildings – 10 to 50 years; site improvements –
5 to 33 years; technical equipment and machinery – 3 to 30
years; and other equipment, factory and office equip-
ment – 2 to 33 years.
2,465
8
(20)
2,453
2.46
2.45
2.45
2.44
2000
(662)
12
(84)
(734)
(0.66)
(0.73)
(0.66)
(0.73)
4,877
35
(149)
4,763
4.84
4.72
4.82
4.71
20012002
Year ended December 31,
Net income (loss) (in millions of 1)
Net income (loss), as reported
before extraordinary items and
cumulative effects of changes in
accounting principles
Add: Stock-based employee
compensation expense included
in reported net income,
net of related tax effects
Deduct: Total stock-based
employee compensation expense
determinded under fair value
based method for all awards,
net of related tax effects
Pro forma net income (loss)
Earnings (loss) per share (in 1):
Basic – as reported before extraor-
dinary items and cumulative effects
of changes in accounting principles
Basic – pro forma
Diluted – as reported before
extraordinary items and cumulative
effects of changes in accounting
principles
Diluted – pro forma