Mercedes 2010 Annual Report Download - page 185

Consolidated Financial Statements | Notes to the Consolidated Financial Statements | 181
Income taxes. Current income taxes are determined based
on the respective local taxable income of the period and local
tax rules. In addition, current income taxes include adjust-
ments for uncertain tax payments or tax refunds for periods not
yet assessed as well as interest expense and penalties on the
underpayment of taxes. Deferred taxes are included in income
taxes and reflect changes in deferred tax assets and liabilities
except for changes recognized directly in equity.
Deferred tax assets or liabilities are determined based on tem-
porary differences between financial reporting and the tax basis
of assets and liabilities including differences from consolidation,
loss carryforwards and tax credits. Measurement is based on
the tax rates expected to be effective in the period in which an
asset is realized or a liability is settled. For this purpose, the tax
rates and tax rules are used which have been enacted or sub-
stantively enacted at the reporting date. Deferred tax assets are
recognized to the extent that taxable profit at the level of the
relevant tax authority will be available for the utilization of the
deductible temporary differences. Daimler recognizes a valua-
tion allowance for deferred tax assets when it is unlikely that
a corresponding amount of future taxable profit will be available
or when Daimler no longer has control over the tax advantage.
Tax benefits resulting from uncertain income tax positions are
recognized at the best estimate of the tax amount expected
to be paid.
Earnings/loss per share. Basic earnings/loss per share are
calculated by dividing profit or loss attributable to shareholders
of Daimler AG by the weighted average number of shares out-
standing. Diluted earnings/loss per share additionally reflect
the potential dilution that would occur if all stock option plans
were exercised.
Goodwill. For acquisitions, goodwill represents the excess
of the consideration transferred over the fair values assigned
to the separately identifiable assets acquired and liabilities
assumed.
Other intangible assets. Intangible assets acquired are mea-
sured at cost less accumulated amortization. If necessary,
accumulated impairment losses are recognized.
Intangible assets with indefinite lives are reviewed annually
to determine whether indefinite-life assessment continues to be
appropriate. If not, the change in the useful-life assessment from
indefinite to finite is made on a prospective basis.
Intangible assets other than development costs with finite use-
ful lives are generally amortized on a straight-line basis over
their useful lives (3 to 10 years) and are tested for impairment
whenever there is an indication that the intangible asset may
be impaired. The amortization period for intangible assets with
finite useful lives is reviewed at least at each year-end. Changes
in expected useful lives are treated as changes in accounting
estimates. The amortization expense on intangible assets with
finite useful lives is recorded in functional costs.
Development costs are recognized if the conditions for capital-
ization according to IAS38 are met. Subsequent to initial recogni-
tion, the asset is carried at cost less accumulated amortization
and accumulated impairment losses. Capitalized development
costs include all direct costs and allocable overheads and
are amortized straight-line over the expected product life cycle
(2 to 10 years). Amortization of capitalized development costs
is an element of the manufacturing costs and is allocated to
those vehicles and components by which they were generated
and is included in cost of sales when the inventory (vehicles)
is sold.
Property, plant and equipment. Property, plant and equip-
ment are measured at acquisition or manufacturing costs less
accumulated depreciation. If necessary, accumulated impair-
ment losses are recognized. The costs of internally produced
equipment and facilities include all direct costs and allocable
overheads. Acquisition or manufacturing costs include the esti-
mated costs of dismantling and removing the item and restoring
the site, if any. Plant and equipment under finance leases are
stated at the lower of present value of minimum lease payments
or fair value less the respective accumulated depreciation
and any accumulated impairment losses. Depreciation expense
is recognized using the straight-line method. The residual value
of the asset is considered. Property, plant and equipment are
depreciated over the following useful lives:
Buildings and site improvements 10 to 50 years
Technical equipment and machinery 6 to 25 years
Other equipment, factory and office equipment 2 to 30 years