Mercedes 2006 Annual Report Download - page 212

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31. Contingent Obligations and Commercial Commitments
Contingent Obligations. Obligations from issuing guarantees
as a guarantor (excluding product warranties) are as follows:
Guarantees for third party liabilities principally represent
guarantees that require the Group to make certain payments if
third parties, non-consolidated affiliated companies and/or
other related companies fail to meet their financial obligations.
Guarantees under buy-back commitments principally represent
arrangements whereby the Group guarantees specified trade-in or
resale values for sold vehicles. Such guarantees provide the
holder with the right to return purchased vehicles to the Group,
partially also in connection with a future purchase of vehicles
or services. The table above excludes residual value guarantees
related to arrangements for which revenue recognition is
precluded due to the Group’s obligation to repurchase assets
sold to unrelated guaranteed parties.
Other contingent obligations principally include pledges or
indemnities related to the quality or timing of performance by
third parties or participations in performance guarantees
of consortiums.
DaimlerChrysler AG and its wholly-owned subsidiary Daimler-
Chrysler Financial Services AG have provided guarantees towards
third parties with respect to the investment in Toll Collect.
See Note 3 for detailed information regarding Toll Collect including
the guarantees issued. Of the guarantees mentioned in Note 3,
only the €230 million guarantee for the bank loan is reflected in the
above table in the line “guarantees for third party liabilities”.
The other guarantees are not reflected in the above table since the
maximum potential future obligation resulting from the remaining
guarantees cannot be accurately estimated.
When circumstances indicate that payment is probable and the
amount is reasonably estimable, guarantees made by the Group
are recognized as a liability in the consolidated balance sheet
in accordance with SFAS 5 “Accounting for Contingencies”, with
an offsetting amount recorded as an expense (contingent
obligation). For guarantees issued or modified after December 31,
2002, the Group records guarantees at fair value, unless a
higher amount must be accrued in accordance with SFAS 5 (non-
contingent obligations). Both contingent obligations and non-
contingent obligations are included in the column “amount rec-
ognized as a liability” in the table above.
Group companies also provide guarantees to third parties
for obligations of other consolidated subsidiaries. Intercompany
guarantees are eliminated in consolidation and therefore are
not reflected in the above table.
In accordance with FIN 45, obligations associated with product
warranties are not reflected in the above table. See Note 24b for
accruals relating to such obligations.
Commercial commitments. The Group has committed in
connection with certain production programs to purchase various
levels of outsourced manufactured parts and components over
extended periods. The Group has also committed to purchase or
invest in the construction and maintenance of various production
facilities. Amounts under these arrangements represent commit-
ments to purchase plant or equipment in the future. As of
December 31, 2006, commitments to purchase outsourced man-
ufactured parts and components as well as to invest in plant
and equipment are approximately €4.8 billion. These amounts
are not reflected in the above table.
1,207
1,444
260
2,911
At December 31,
amount recognized
as a liability
2005
2006
At December 31,
maximum potential
future obligations
20052006
412
406
125
943
299
372
127
798
1,819
1,499
249
3,567
Guarantees for third party
liabilities
Guarantees under buy-back
commitments
Other contingent obligations
(in millions of €)