Mercedes 2006 Annual Report Download - page 164

1. Summary of Significant Accounting Policies
General. The consolidated financial statements of Daimler-
Chrysler AG and its subsidiaries (“DaimlerChrysler” or the “Group”)
have been prepared in accordance with generally accepted
accounting principles in the United States of America (“US GAAP”).
All amounts are presented in euros (“€”).
Certain amounts reported in previous years have been
reclassified to conform to the 2006 presentation.
Commercial practices with respect to certain products manufac-
tured 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 the activities of its
financial services business. To enhance readers’ understanding
of the Group’s consolidated financial statements, the accom-
panying financial statements present, in addition to the audited
consolidated financial statements, unaudited information with
respect to the results of operations and financial position of the
Group’s industrial and financial services business activities.
Such information, however, is not required by US GAAP and is not
intended to, and does not represent the separate US GAAP
results of operations and financial position of the Group’s industrial
or financial services business activities. Information concerning
the financial services business activities of the Group refers to the
financing and leasing business of the Financial Services segment
excluding Mobility Management and the activities of Daimler-
Chrysler Financial Services AG. Transactions between the Group’s
industrial and financial services business activities principally
represent intercompany sales of products, intercompany borrow-
ings 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 in
conformity with US GAAP requires management to make estimates
and assumptions related to the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at
the date of the consolidated financial statements as well as
the reported amounts of revenues and expenses for the period.
Significant items related to such estimates and assumptions
include recoverability of investments in equipment on operating
leases, collectibility of sales financing and finance lease receiv-
ables, sales incentive obligations, warranty obligations, assets and
obligations related to employee benefits and useful lives of fixed
assets. Actual amounts could differ from those estimates.
Risks and uncertainties. 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, adverse
changes in global economic conditions; overcapacity and
intense competition in the automotive industry; dependence on
suppliers of parts and services, primarily single source suppliers;
the concentrations of DaimlerChrysler’s revenues derived from the
United States and Western Europe; the significant portion of
DaimlerChrysler’s workforce subject to collective bargaining
agreements; fluctuations in currency exchange rates, interest
rates and commodity prices; significant legal proceedings and
environmental and other government regulations.
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Notes to the Consolidated Financial Statements
Basis of Presentation