Mercedes 2010 Annual Report Download - page 186

182
Leasing. Leasing includes all arrangements that transfer the
right to use a specified asset for a stated period of time in return
for a payment, even if the right to use such asset is not explicitly
described in an arrangement. The Group is a lessee of property,
plant and equipment and a lessor of its products. It is evaluated
on the basis of the risks and rewards of a leased asset whether
the ownership of the leased asset is attributed to the lessee
(finance lease) or to the lessor (operating lease). Rent expense
on operating leases where the Group is lessee is recognized
over the respective lease terms on a straight-line basis. Equip-
ment on operating leases where the Group is lessor is carried
initially at its acquisition or manufacturing cost and is depreciated
to its expected residual value over the contractual term of the
lease, on a straight-line basis. The same accounting principles apply
to assets if Daimler sells such assets and leases them back from
the buyer.
Impairment of non-financial assets. Daimler assesses at each
reporting date whether there is an indication that an asset may
be impaired. If such indication exists, or when annual impair-
ment testing for an asset is required (goodwill, other intangible
assets with indefinite useful lives and intangible assets not yet
in use), Daimler estimates the recoverable amount of the asset.
The recoverable amount is determined for each individual asset
unless the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets
(cash-generating units). The recoverable amount is the higher
of fair value less costs to sell and value in use. Daimler deter-
mines the recoverable amount as fair value less costs to sell and
compares it with the carrying amount (including goodwill). Fair
value is measured by discounting future cash flows using a risk-
adjusted interest rate. Cash flows which influence the assess-
ment of residual values are estimated on the basis of multi-year
planning. Periods not covered by the forecast are taken into
account by recognizing a residual value, which principally does
not consider any growth rates. If fair value less costs to sell can-
not be determined or is lower than the carrying amount, value in
use is calculated. If the carrying amount exceeds the recover-
able amount, an impairment charge is recognized amounting to
the difference.
An assessment for assets other than goodwill is made at each
reporting date as to whether there is any indication that previ-
ously recognized impairment losses may no longer exist or may
have decreased. If this is the case, Daimler records a partial
or an entire reversal of the impairment. Thereby, the carrying
amount is increased to its recoverable amount. However, the
increased carrying amount shall not exceed the carrying amount
that would have been determined (net of depreciation) had no
impairment loss been recognized in prior years.
Non-current assets held for sale and disposal groups. Non-
current assets held for sale or disposal groups are classified as
held for sale and disclosed separately in the statement of finan-
cial position. The assets or disposal groups are then measured
at the lower of carrying amount and fair value less costs to sell
and are no longer depreciated. If fair value less costs to sell sub-
sequently increases, any impairment loss previously recognized
is reversed. The reversal is restricted to the impairment losses
previously recognized for the assets concerned.
Inventories. Inventories are measured at the lower of cost and
net realizable value. The net realizable value is the estimated
selling price less any remaining costs to sell. The cost of inven-
tories is based on the average cost principle and includes costs
incurred in acquiring the inventories and bringing them to their
existing location and condition. In the case of manufactured
inventories and work in progress, cost also includes production
overheads based on normal capacity.
Financial instruments. A financial instrument is any contract
that gives rise to a financial asset of one entity and a financial
liability or equity instrument of another entity. Financial instru-
ments in the form of financial assets and financial liabilities
are generally presented separately. Financial instruments are
recognized as soon as Daimler becomes a party to the contrac-
tual provisions of the financial instrument.