Mercedes 2002 Annual Report Download - page 107

Notes to Consolidated Financial Statements |101
In April 2002, the FASB issued SFAS 145, “Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement
13 and Technical Corrections.” SFAS 145 requires gains and
losses on extinguishments of debt to be classified as gains or
losses from continuing operations rather than as extraordinary
items as previously required under SFAS 4, unless the gains
and losses meet the criteria to be classified as extraordinary
pursuant to APB 30. SFAS 145 also amends SFAS 13,
“Accounting for Leases,” to eliminate an inconsistency between
the required accounting for sale-lease back transactions and
the required accounting for certain lease modifications that
have economic effects that are similar to sale-lease back
transactions. The rescission of SFAS 4 is effective for fiscal
years beginning after May 15, 2002. The provisions of SFAS
145 related to SFAS 13 are effective for transactions occurring
after May 15, 2002. The adoption of these provisions had no
impact on the Group’s consolidated financial statements.
In July 2002, the FASB issued SFAS 146, “Accounting for
Costs Associated with Exit or Disposal Activities.” The State-
ment requires that a liability for costs associated with exit or
disposal activities be recognized in the period in which the
costs are incurred if a reasonable estimate of fair value can be
made. Under current accounting guidance, a liability can be
recognized when management has committed to an exit plan.
The requirements under SFAS 146 are effective prospectively
for exit or disposal activities initiated after December 31,
2002. Restatement of previously issued financial statements
is not permitted. The adoption of this Statement will affect the
Group’s accounting for exit and disposal activities initiated
after December 31, 2002.
In November 2002, the Emerging Issue Task Force (“EITF”)
reached a final consensus on EITF 00-21, “Revenue Arrange-
ments with Multiple Deliverables.” EITF 00-21 addresses
certain aspects of the accounting of revenue arrangements
with multiple deliverables by a vendor. The Issue outlines an
approach to determine when a revenue arrangement for
multiple deliverables should be divided into separate units of
accounting and, if separation is appropriate, how the arrange-
ment consideration should be allocated to the identified
accounting units. The consensus reached in the Issue will be
effective for DaimlerChrysler in its financial statements begin-
ning July 1, 2003. DaimlerChrysler will apply the consensus
prospectively in 2003. DaimlerChrysler is currently determin-
ing the impact of the adoption of EITF 00-21 on the Group’s
consolidated financial statements.
Also in November 2002, the FASB issued FASB Interpretation
(“FIN”) 45, “Guarantor’s Accounting and Disclosure Require-
ments for Guarantees, Including Indirect Guarantees of
Indebtedness of Others – an interpretation of FASB state-
ments 5, 57, and 107 and rescission of FASB Interpretation
34.” This Interpretation elaborates on the disclosure to be
made by a guarantor in its financial statements regarding obli-
gations under certain guarantees that it has issued. FIN 45
also clarifies that a guarantor is required to recognize, at
inception of a guarantee, a liability for the fair value of the
obligation due to the issuance of the guarantee. Disclosure
requirements are effective for financial statements of interim
and annual periods ending after December 15, 2002 (see
Notes 25 b and 31). The recognition and measurement provi-
sions are effective for guarantees issued or modified after
December 31, 2002. DaimlerChrysler is currently determining
the impact of the recognition and measurement provisions of
FIN 45 on the Group’s consolidated financial statements.
In December 2002, the FASB issued SFAS 148, “Accounting
for Stock-Based Compensation – Transition and Disclosure –
an amendment of FASB Statement No. 123.” SFAS 148
amends SFAS 123, “Accounting for Stock-Based Compensa-
tion” to provide alternative methods of transition for a volun-
tary change to the fair value based method of accounting for
stock-based employee compensation. In addition, SFAS 148
requires more prominent disclosures in both interim and annu-
al financial statements about the method of accounting used
for stock-based employee compensation and the effect of the
method used on reported results. DaimlerChrysler applies APB
25 that uses an intrinsic value based approach to measure
compensation expense. The Group is currently considering the
adoption of SFAS 123 in 2003. Under SFAS 123, compen-
sation expense of stock option plans is measured at the grant
date based on the fair value of the award using an option-pric-
ing model. Compensation expense is recognized over the serv-
ice period with an offsetting credit to equity (paid-in capital).
If adopted, use of the fair value based method will result in
additional compensation expense in the Group’s statement of
income (loss) depending upon the number, price and other
significant terms of the stock options granted (see Note 24).
In January 2003, the FASB issued FIN 46, “Consolidation
of Variable Interest Entities – an interpretation of ARB No. 51,”
which clarifies the application of the consolidation rules to
certain variable interest entities. FIN 46 established a new
multi-step model for the consolidation of variable interest enti-
ties when a company has a controlling financial interest based
either on voting interests or variable interests. Consolidation
based on variable interests is required by the primary benefici-
ary if the equity investors lack essential characteristics of a