Mercedes 2012 Annual Report Download - page 242

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7 | Consolidated Financial Statements | Notes to the Consolidated Financial Statements
In addition, the Daimler Financial Services segment is exposed
to credit risk from irrevocable loan commitments to retailers
and end customers. At December 31, 2012, irrevocable loan
commitments of Daimler Financial Services amounted to €990
million (2011: €1,921 million), of which €640 million had a
maturity of less than one year (2011: €1,603 million), €176 million
had maturities between one and three years (2011: €135
million), €133 million had maturities between three and four
years (2011: €27 million) and €41 million had maturities between
four and five years (2011: €156 million).
The Daimler Financial Services segment has guidelines
at a global as well as at a local level which set the framework
for effective risk management. In particular, these rules
deal with minimum requirements for all risk-relevant credit
processes, the evaluation of customer quality, requests
for collateral as well as the treatment of unsecured loans and
non-performing claims. The limitation of concentration risks
is implemented primarily by means of global limits, which refer
to single customer exposures. As of December 31, 2012,
exposure to the top 15 customers did not exceed 3.9% (2011:
4.0%) of the total portfolio.
With respect to its financing and lease activities, the Group
holds collateral for customer transactions. The value of
collateral generally depends on the amount of the financed
assets. Usually, the financed vehicles serve as collateral.
Furthermore, Daimler Financial Services mitigates the credit
risk from financing and lease activities, for example through
advance payments from customers.
Scoring systems are applied for the assessment of the
default risk of retail and small business customers. Corporate
customers are evaluated using internal rating instruments.
Both evaluation processes use external credit bureau data if
available. The scoring and rating results as well as the availability
of security and other risk mitigation instruments, such as
pre-payments, guarantees and, to a lower extent, residual debt
insurances, are essential elements for credit decisions.
Significant financing loans and finance leases to corporate
customers are tested individually for impairment. An individual
loan or finance lease is considered impaired when there is
objective evidence that the Group will be unable to collect all
amounts due as specified by the contractual terms. Examples
of objective evidence that loans or finance lease receivables
maybe impaired include the following factors: significant financial
difficulty of the borrower, a rising probability that the borrower
will become bankrupt, delinquency in his installment payments,
and restructured or renegotiated contracts to avoid immediate
delinquency.
The vast majority of loans and finance lease receivables
related to retail or small business customers are grouped into
homogeneous pools and collectively assessed for impairment.
Objective evidence that loans and finance lease receivables
are impaired includes adverse changes in the payment status
of the borrowers included in the pool and an unfavorable
change in the economic conditions affecting the portfolio
with similar risk characteristics.
Within the framework of testing for impairment, existing
collateral is generally given due consideration. In that context,
any excess collateral of individual customers is not netted
of with insufficient collateral of other customers. The maximum
credit risk is limited by the fair value of collateral (e.g. financed
vehicles).
If single loans and lease receivables are identified to be
individually impaired, procedures are initiated to take posses-
sion of the asset financed or leased or, alternatively, to rene-
gotiate the impaired contract. Restructuring policies and prac-
tices are based on the indicators or criteria which, in the
judgment of local management, indicate that repayment will
probably continue and that the total proceeds expected to
be derived from the renegotiated contract exceed the expected
proceeds to be derived from repossession and remarketing.
Maximum risk positions of financial assets and loan commitments
See also
Note
Maximum
risk position
2012
Maximum
risk position
2011
In millions of euros
Liquid assets 16,594 11,857
Receivables from financial
services 14
49,060
45,567
Trade receivables 19 7,543 7,849
Derivative financial instruments
used in hedge accounting
(assets only)
16
1,364
559
Derivative financial instruments
not used in hedge accounting
(assets only) 16
341
350
Loan commitments 29 1,022 1,960
Other receivables and
financial assets 16
2,224
2,115
7. 81