Mercedes 2002 Annual Report Download - page 140

134 |Other Notes
The carrying amounts and fair values of the Group’s financial
instruments are as follows:
The methods and assumptions used to determine the fair values
of financial instruments are summarized below:
Financial Assets and Securities – The fair values of securities
were estimated using quoted market prices. The Group has
certain equity investments in related and affiliated companies
not presented in the table, as these investments are not
publicly traded and determination of fair values is impracti-
cable.
Receivables from Financial Services – The carrying amounts
of variable rate finance receivables were estimated to approxi-
mate their fair values since the contract rates of those receiv-
ables approximate current market rates. The fair values of
fixed rate finance receivables were estimated by discounting
expected cash flows using the current interest rates at which
comparable loans with identical maturity would be made as
of December 31, 2002 and 2001.
The carrying amounts of Cash and Other receivables
approximate fair values due to the short-term maturities of
these instruments.
Financial Liabilities – The fair value of publicly traded debt
was estimated using quoted market prices. The fair values of
other long-term notes and bonds were estimated by discount-
ing future cash flows using market interest rates over the
remaining term. The carrying amounts of commercial paper
and borrowings under revolving credit facilities were assumed
to approximate fair value due to their short maturities.
Currency Contracts – The fair values of forward foreign
exchange contracts were based on European Central Bank
reference exchange rates adjusted for the respective interest
rate differentials (premiums or discounts). Currency options
were valued on the basis of quoted market prices or on
estimates based on option pricing models.
Interest Rate Contracts – The fair values of existing instru-
ments to hedge interest rate risks (e. g. interest rate swap
agreements) were estimated by discounting expected cash
flows using market interest rates over the remaining term of
the instrument. Interest rate options are valued on the basis
of quoted market prices or on estimates based on option
pricing models.
Equity Contracts – The fair values of existing instruments to
hedge equity price risk (e. g. futures or options) were deter-
mined on the basis of quoted market prices or on estimates
based on option pricing models.
c) Credit Risk
The Group is exposed to credit-related losses in the event of
non-performance by counterparties to financial instruments.
DaimlerChrysler manages the credit risk exposure to financial
institutions through diversification of counterparties and
review of each counterparties’ financial strength. Daimler-
Chrysler does not have a significant exposure to any individual
counterparty, based on the rating of the counterparties per-
formed by established rating agencies. DaimlerChrysler
Services has established detailed guidelines for the risk mana-
gement process related to the exposure to financial services
customers. Additional information with respect to receivables
from financial services and allowance for doubtful accounts
is included in Note 18.
(in millions of 3)Fair value
Carrying
amountFair value
Carrying
amount
At December 31,
2001
At December 31,
2002
Financial instruments
(other than derivative
instruments):
Assets:
Financial assets
Recaivables from
financial service
Securities
Cash and cash
equivalents
Other receivables
Liabilities:
Financial liabilities
Derivative instruments:
Assets:
Currency contracts
Interest rate contracts
Equity contracts
Liabilities:
Currency contracts
Interest rate contracts
Equity contracts
1,870
52,088
3,293
9,130
5
79,112
1,759
3,776
–
105
302
–
1,870
52,622
3,293
9,130
5
83,861
1,759
3,776
–
105
302
–
1,209
49,512
3,077
11,428
20
90,908
477
1,011
4
806
1,434
4
1,209
49,678
3,077
11,428
20
94,513
477
1,011
4
806
1,434
4