Mercedes 2010 Annual Report Download - page 183

Consolidated Financial Statements | Notes to the Consolidated Financial Statements | 179
Investments in associated companies and joint ventures.
Associated companies are equity investments in which Daimler
has the ability to exercise significant influence over the financial
and operating policies of the investee. Joint ventures are those
entities over whose activities Daimler has joint control with
partners, which are established by contractual agreement and
requiring unanimous consent for strategic financial and oper-
ating decisions. Associated companies and joint ventures are
accounted for using the equity method.
At the acquisition date, the excess of the cost of Daimler’s
initial investment in equity method companies over the Group’s
proportionate reassessed ownership interest is recognized
as investor level goodwill and included in the carrying amount
of the investment accounted for using the equity method.
If the carrying amount exceeds the recoverable amount of an
investment in any associated company or joint venture, the
carrying amount of the investment is reduced to the recoverable
amount. The recoverable amount is the higher of fair value less
costs to sell and value in use. An impairment loss is recognized
in the statement of income in the line item “Share of profit/loss
from investments accounted for using the equity method, net.”
Income and expenses from the sale of investments accounted
for using the equity method are shown in the same line item.
Profits from transactions with associated companies and joint
ventures are eliminated by reducing the carrying amount of the
investment.
Daimler’s share of any dilution gains and losses reported by its
investees accounted for under the equity method are recognized
in share of profit/loss from investments accounted for using the
equity method, net.
For the investments in the European Aeronautic Defence and
Space Company EADS N.V. (EADS), Tognum AG (Tognum)
and Kamaz OAO (Kamaz), the Group’s proportionate share of
the results of operations is included in Daimler’s consolidated
financial statements with a three-month time lag because the
financial statements of those associated companies are not
made available in good time to Daimler. Adjustments are made
for all significant events or transactions that occur during the
time lag (see also Note 13).
Foreign currency translation. Transactions in foreign currency
are translated at the relevant foreign exchange rates prevailing
at the transaction date. Gains and losses from the subsequent
measurement of financial assets and liabilities denominated
in foreign currency are recognized in profit and loss (except for
available-for-sale equity instruments and financial liabilities
designated as a hedge of a net investment in a foreign operation).
Assets and liabilities of foreign companies for which the functional
currency is not the euro are translated into euros using period-
end exchange rates. The translation adjustments generated after
the transition to IFRS on January 1, 2005 are presented directly
in equity. The consolidated statements of income/loss and cash
flows are translated into euros using average exchange rates
during the respective periods.
The exchange rates of the US dollar, the most significant foreign
currency for Daimler, were as follows:
2010 2009
1 € = 1 € =
Exchange rate at December 31 1.3362 1.4406
Average exchange rate
First quarter 1.3829 1.3029
Second quarter 1.2709 1.3632
Third quarter 1.2910 1.4303
Fourth quarter 1.3590 1.4785
Accounting policies
Revenue recognition. Revenue from sales of vehicles, service
parts and other related products is recognized when the risks
and rewards of ownership of the goods are transferred to the
customer, the amount of revenue can be estimated reliably
and collectability is reasonably assured. Revenue is recognized
net of sales reductions such as cash discounts and sales incen-
tives granted.
Daimler uses sales incentives in response to a number of market
and product factors, including pricing actions and incentives
offered by competitors, the amount of excess industry production
capacity, the intensity of market competition and consumer
demand for the product. The Group may offer a variety of sales
incentive programs at any point in time, including cash offers
to dealers and consumers, lease subsidies which reduce the
consumers’ monthly lease payment, or reduced financing rate
programs offered to costumers.