Mercedes 2012 Annual Report Download - page 199

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Daimler regularly evaluates the current stage of legal proceed-
ings, also with the involvement of external legal counsel.
It is therefore possible that the amounts of the provisions for
pending or potential litigation will have to be adjusted due
to future developments. Changes in estimates and premises
can have a material effect on the Group’s future profitability.
The end of a legal dispute can result in Daimler having to make
payments in excess of the provisions recognized for that
purpose. It is also possible that the outcome of individual cases
for which no provisions could be recognized might force the
Group to make payments whose amounts or range of amounts
could not be reliably estimated at December 31, 2012. Although
the final outcome of such cases can have a material effect
on Daimler’s earnings or cash flows in a certain reporting
period, in our assessment, any such resulting obligations will
not have a sustained impact on the Group’s financial position.
Further information on legal proceedings is provided in Note 28.
Pension obligations. To calculate the present values of
defined benefit pension obligations, it is necessary among other
things to determine discounting factors. Discounting factors
are to be determined by reference to market yields at the end
of the reporting period on high-quality corporate bonds in
the respective markets. A change in the discount rate by plus
or minus 0.25% would result in a reduction or an increase
of €0.8 billion or €0.8 billion in the present value of the defined
benefit obligation for pensions of the major German compa-
nies. In addition, at the beginning of the financial year, Daimler
has to estimate the expected returns on plan assets on the
basis of market expectations for the types of investment included
in the plan assets. The level of the discount rate has a material
effect on the funded status of the pension plans. Furthermore,
the discounting factors and the expected return on plan assets
have a significant effect on net periodic pension costs. Due
to the use of the corridor method, changes in the assumptions
as well as deviations of actual developments compared to
assumptions made will not directly affect the consolidated state-
ment of financial position or the consolidated statement of
income. Starting with the year 2013, however, these effects will
be reflected directly in the consolidated statement of financial
position and accordingly in the consolidated statement of com-
prehensive income. Further information in this context is
provided in Notes 1 and 22.
Income taxes. The calculation of income taxes of Daimler AG
and its subsidiaries is based on the legislation and regulations
applicable in the various countries. Due to their complexity,
the tax items presented in the financial statements are possibly
subject to different interpretation by taxpayers on the one
hand and local tax authorities on the other. For the calculation
of deferred tax assets, assumptions have to be made regarding
future taxable income and the time of realization of the
deferred tax assets. In this context, we take into consideration,
among other things, the projected earnings from business
operations, the effects on earnings of the reversal of taxable
temporary differences, and realizable tax strategies. As future
business developments are uncertain and are sometimes
beyond Daimler’s control, the assumptions to be made in connec-
tion with accounting for deferred tax assets are connected
with a substantial degree of uncertainty. On each balance sheet
date, Daimler carries out impairment tests on deferred tax
assets on the basis of the planned taxable income in future
financial years; if Daimler assesses that the probability of
future tax advantages being partially or fully unrealized is more
than 50%, the deferred tax assets are impaired. Further
information is provided in Note 9.
3. Significant acquisitions and dispositions of interests
in companies and of other assets and liabilities
Significant acquisitions and dispositions of interests in
companies and of other assets and liabilities in 2012 and 2011
especially relate to the investments in European Aeronautic
Defence and Space Company EADS N.V., in Engine Holding GmbH
and Tognum AG, and in Beijing Foton Daimler Automotive Co.
Ltd. Information on these transactions is provided in Note 13.
MBtech Group. On December 7, 2011, Daimler and AKKA
Technologies SA signed a contract on the sale of a 65% interest
in the Daimler subsidiary MBtech Group GmbH & Co. KGaA
(MBtech Group). The transaction was concluded on April 12, 2012
and resulted in a cash inflow of €48 million and a gain before
income taxes of €10 million in 2012. These amounts are primarily
allocated to the Mercedes-Benz Cars segment. Since conclu-
sion of the transaction, the remaining equity interest in MBtech
Group is accounted for using the equity method. The assets
and liabilities of MBtech Group amounted to €85 million and
€78 million as of the closing of the transaction (December 31,
2011: €90 million and €78 million); in the total amount of
assets, €8 million of cash and cash equivalents are included.
Due to the minor significance for the Daimler Group’s financial
position, cash flows and profitability, the disposal of these
assets and liabilities is not presented separately in the consoli-
dated statement of financial position for the year 2011.