Mercedes 2006 Annual Report Download - page 207

Consolidated Financial Statements | Notes to the Consolidated Balance Sheets | 191
The changes in provisions for those product guarantees are
summarized as follows:
The amount included in the line item “product guarantees issued
in respective year” represents the additions to the accruals
for product guarantees recognized in the corresponding year for
products sold in that year.
In 2005, “changes from prior period product guarantees
issued” are partly offset by payments received from suppliers in
settlement of claims for recovery of the costs for recall
campaigns.
The Group also offers customers the opportunity to purchase
separately priced extended warranty and maintenance contracts.
The revenue from these contracts is deferred at the inception
of the contract and recognized into income over the contract
period in proportion to the costs expected to be incurred based
on historical information. Included in “deferred income” in
the consolidated balance sheets, the deferred revenue from
these contracts is summarized as follows:
The provisions for derivative financial instruments are mainly due
to exchange rate risks from financial liabilities and future
sales revenues. The deviation from the previous year is especially
attributable to the changed currency relation of the euro in
relation to the US dollar.
Estimated future postretirement benefit payments. Postre-
tirement benefits paid pertaining to the Group’s plans were €832
million and €844 million during 2006 and 2005, respectively.
The total estimated future postretirement benefits to be paid by
the Group’s plans for the next 10 years approximate €10.9
billion and are expected to be paid as follows:
Prepaid employee benefits. In 1996 DaimlerChrysler
established a Voluntary Employees’ Beneficiary Association
(“VEBA”) trust for payment of non-pension employee benefits.
At December 31, 2006 and 2005, the VEBA trust had a balance of
€2,385 million and €2,392 million, respectively, of which the
long-term assets in the VEBA trust of €1,861 million and €1,835
million, respectively, are reported as plan assets for the accu-
mulated postretirement benefit obligations and not reported in
DaimlerChrysler’s Consolidated Balance Sheets. The short-term
assets in the VEBA trust are classified as cash and marketable
securities in DaimlerChrysler’s Consolidated Balance Sheets.
No contributions to the VEBA trust were made in 2006, 2005 and
2004. DaimlerChrysler does not expect to make any contribu-
tions to the VEBA trust in 2007.
b) Other accrued liabilities
Other accrued liabilities consisted of the following:
DaimlerChrysler issues various types of product guarantees
under which it generally guarantees the performance of products
delivered and services rendered for a certain period or term
(see Note 31). The accrued liability for these product guarantees
covers expected costs for legal and contractual obligated war-
ranties as well as expected costs for policy coverage, recall cam-
paigns and buyback commitments. The liability for buyback
commitments represents the expected costs related to the Group’s
obligation, under certain conditions, to repurchase a vehicle
from a customer. Buybacks may occur for a number of reasons
including litigation, compliance with laws and regulations in
a particular region and customer satisfaction issues.
2012-
201620112010200920082007
0.9 1.0 1.0 1.1 1.1 5.8
Expected
payments
(in billions of €)
At December 31,
2005
2006
10,483
4,834
3,153
470
4,941
23,881
11,632
5,381
3,219
1,706
5,866
27,804
Product guarantees
Accrued sales incentives
Accrued personnel and social costs
Derivative financial instruments
Other
(in millions of €)
2005
2006
11,632
(606)
(4,779)
4,606
(370)
10,483
10,877
767
(5,587)
5,012
563
11,632
Balance at January 1
Currency change and change in consolidated
companies
Utilizations and transfers
Product guarantees issued in respective year
Changes from prior period product guarantees
issued
Balance at December 31
(in millions of €)
2005
2006
1,548
(129)
719
(524)
1,614
1,115
226
694
(487)
1,548
Balance at January 1
Currency change and transfers
Deferred revenue current period
Earned revenue current period
Balance at December 31
(in millions of €)