Mercedes 2006 Annual Report Download - page 218

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At December 31, 2006, the Group also recognized subordinated
loans with a carrying value of €67 million (2005: €25 million) to
a trust related to the European ABS-platform.
The fair value of retained interests in sold receivables and
the subordinated loan are included in other assets (see Note 18).
Assumptions in measuring the retained interests and
sensitivity analysis. At December 31, 2006 and 2005,
significant assumptions used in measuring the residual interest
resulting from the sale of retail and wholesale receivables
were as follows (weighted average rates for securitizations
completed during the respective year):
Actual and projected net lifetime credit losses for retail
receivables securitized were as follows:
Static pool losses are calculated by summing the actual and
projected future credit losses and dividing them by the original
balance of each pool of assets. The amount shown above for
each year is a weighted average for all securitizations during that
year and outstanding at December 31, 2006.
At December 31, 2006, the significant assumptions used in
estimating the residual cash flows from sold receivables and the
sensitivity of the current fair value to immediate 10% and 20%
adverse changes are as follows:
Similar adverse changes in the discount rate, monthly prepayment
speed and the expected remaining net credit losses as a
percentage of receivables sold for the retained subordinated
securities would not have a significant effect on the fair
value of the retained subordinated securities.
These sensitivities are hypothetical and should be used with
caution. The effect of a variation in a particular assumption
on the fair value of the retained interests is calculated without
changing any other assumption; in reality, changes in one
assumption may result in changes in another, which might magnify
or counteract the sensitivities.
Wholesale
2005
Retail
2005 20062006
1)
3
0.0%
12.0%
1.25%-
1.5%
18
1.7%
12.0%
1.25%-
1.5%
18
1.9%
12.0%
1)
3
0.0%
12.0%
Prepayment speed
assumption (monthly rate)
Lifetime (in months)
Estimated lifetime net
credit losses (an average
percentage of sold
receivables)
Residual cash flows discount
rate (annual rate)
1 For the calculation of wholesale gains, the Group estimated that all sold wholesale loans would
be liquidated within 210 days.
Receivables securitized in
20062004 20052003
1.6%
1.6%
2.0%
2.5%
1.7%
1.8%
2.3%
1.7%
1.9%
1.7%
Actual and projected credit losses percentages as of
December 31, 2006
December 31, 2005
December 31, 2004
December 31, 2003
Impact on fair value
based on adverse
20%
change
10%
change
Assumption
percentage
(1)
(23)
(20)
(2)
(46)
(40)
1.25%-1.5%
0.8%
12.0%
Prepayment speed, monthly
Expected remaining net
credit losses as a percentage of
receivables sold
Residual cash flow discount rate,
annualized
(in millions of €)