Mercedes 2010 Annual Report Download - page 230

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The fair values of financial instruments were calculated on the
basis of market information available on the balance sheet date.
The following methods and premises were used:
Receivables from financial services. The fair values of receiv-
ables from financial services with variable interest rates are
estimated to be equal to the respective carrying amounts since
the interest rates agreed and those available on the market do
not significantly differ. The fair values of receivables from financial
services with fixed interest rates are determined on the basis of
discounted expected future cash flows. The discounting is based
on the current interest rates at which similar loans with identical
terms could have been borrowed as of December 31, 2010 and
December 31, 2009.
Trade receivables and cash and cash equivalents. Due to
the short terms of these financial instruments, it is assumed that
their fair values are equal to the carrying amounts.
Marketable debt securities and other financial assets.
Financial assets available for sale include:
– debt and equity instruments measured at fair value; these
instruments were measured using quoted market prices at
December 31. Otherwise, the fair value measurement of
these debt and equity instruments is based on inputs that are
either directly or indirectly observable on active markets.
– equity interests measured at cost; for these financial instruments
fair values could not be determined because market prices
or fair values are not available. These equity interests comprise
investments in non-listed companies for which no objective
evidence existed at the balance sheet date that these assets
are impaired and whose fair values cannot be determined
with sufficient reliability. It is assumed that the fair values
approximate the carrying amounts.
Financial assets recognized at fair value through profit or loss
include derivative financial instruments not used in hedge
accounting. These financial instruments as well as derivative
financial instruments used in hedge accounting comprise:
– derivative currency hedging contracts; the fair values of
currency forwards and cross currency interest rate swaps are
determined on the basis of the discounted estimated future
cash flows using market interest rates appropriate to the re-
maining terms of the financial instruments. Currency options
were measured using price quotations or option pricing models
using market data.
– derivative interest rate hedging contracts; the fair values
of interest rate hedging instruments (e.g. interest rate swaps,
forward rate agreements) are calculated on the basis of the
discounted estimated future cash flows using the market inter-
est rates appropriate to the remaining terms of the financial
instruments. Interest options were measured using price quo-
tations or option pricing models using market data.
– derivative commodity hedging contracts; the fair values of
commodity hedging contracts (e.g. commodity forwards)
are determined on the basis of current reference prices in
consideration of forward premiums and discounts.
Other receivables and assets are carried at amortized cost. Because
of the predominant short maturities of these financial instru-
ments in general, it is assumed that the fair values approximate
the carrying amounts.
Financing liabilities. The fair values of bonds, loans and de-
posits in the direct banking business are calculated as the present
values of the estimated future cash flows. Market interest rates
for the appropriate terms are used for discounting. On account of
the short terms of commercial papers it is assumed that the
carrying amounts of these financial instruments approximate
their fair values.