Mercedes 2012 Annual Report Download - page 191

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Profits and losses from transactions with associated compa-
nies and joint ventures are eliminated by adjusting the carrying
amount of the investment accordingly.
Daimler’s share of any dilution gains and losses resulting
from capital increases by its investees accounted for using the
equity method in which the Group or other shareholders
do not participate are recognized in share of profit/loss from
investments accounted for using the equity method, net.
In the special event that the financial statements of associated
companies or joint ventures should not be available in good
time, the Group’s proportionate share of the results of operations
is included in Daimler’s consolidated financial statements
with a one to three-month time lag. 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. In subsequent periods,
assets and liabilities denominated in foreign currency are trans-
lated into euros using period-end exchange rates; gains and
losses from this measurement are recognized in profit and loss
(except for gains and losses resulting from the translation
of available-for-sale equity instruments which are recognized
in other comprehensive income/loss).
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
are presented in other comprehensive income/loss. The
components of equity are translated using historical rates.
The consolidated statements of income 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 shown in table  7.07.
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 incentives granted.
Daimler uses sales incentives in response to a number of
market and product factors, including pricing actions and incen-
tives 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 a 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.
Revenue from receivables from financial services is recognized
using the effective interest method. When loans are issued
below market rates, related receivables are recognized at present
value and revenue is reduced for the interest incentive granted.
If subsidized leasing fees are agreed upon in connection with
finance leases, revenue from the sale of a vehicle is reduced by
the amount of the interest incentive granted.
The Group offers an extended, separately priced warranty
for certain products. Revenue from these contracts is deferred
and recognized into income over the contract period in pro-
portion to the costs expected to be incurred based on historical
information. In circumstances in which there is insufficient
historical information, income from extended warranty contracts
is recognized on a straight-line basis. A loss on these contracts
is recognized in the current period if the sum of the expected
costs for services under the contract exceeds unearned revenue.
For transactions with multiple deliverables, such as when
vehicles are sold with free or reduced-in-price service programs,
the Group allocates revenue to the various elements based
on their estimated fair values.
Exchange rates of the US dollar
2012 2011
€1 = €1 =
Average exchange rate on December 31 1.3194 1.2939
Average exchange rates
First quarter 1.3108 1.3680
Second quarter 1.2826 1.4391
Third quarter 1.2502 1.4127
Fourth quarter 1.2967 1.3482
7. 07