Mercedes 2013 Annual Report Download - page 193

197
F | Consolidated Financial Statements | Notes to the Consolidated Financial Statements
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 recog-
nized 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
incentives offered by competitors, the amount of excess
industry production capacity, the intensity of market competi-
tion, 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.
Sales in which the Group guarantees the minimum resale value
of the product are accounted for as an operating lease. The
guarantee of the resale value may take the form of an obligation
by Daimler to pay any deficiency between the proceeds the
customer receives upon resale and the guaranteed amount, or
an obligation to reacquire the vehicle after a certain period
of time at a set price. Gains or losses from the resale of these
vehicles are included in gross profit in the consolidated state-
ment of income.
Revenue from operating leases is recognized on a straight-
line basis over the lease term. Among the assets subject
to operating leases are Group products which are purchased
by Daimler Financial Services from independent third-party
dealers and leased to customers. After revenue recognition
from the sale of the vehicles to independent third-party
dealers, these vehicles create further revenue from leasing
and remarketing as a result of lease contracts entered into.
The Group estimates that the revenue recognized following
the sale of vehicles to dealers equals approximately the
additions to leased assets at Daimler Financial Services. Addi-
tions to leased assets at Daimler Financial Services were
approximately €8 billion in 2013 (2012: approximately €8 billion).
Research and non-capitalized development costs.
Expenditure for research and development that does not meet
the conditions for capitalization according to IAS38 Intangible
Assets is expensed as incurred.
Borrowing costs. Borrowing costs are expensed as incurred
unless they are directly attributable to the acquisition, con-
struction or production of a qualifying asset and are therefore
part of the cost of that asset. Depreciation of the capitalized
borrowing costs is presented within cost of sales.
Government grants. Government grants related to assets
are deducted from the carrying amount of the asset and
are recognized in profit or loss over the life of a depreciable
asset as a reduced depreciation expense. Government
grants which compensate the Group for expenses are recog-
nized as other operating income in the same period as
the expenses themselves.
Interest income and interest expense. Interest income
and interest expense include interest income from investments
in securities, cash and cash equivalents as well as interest
expense from liabilities. Furthermore, interest and changes
in fair values related to interest rate hedging activities as
well as income and expense resulting from the allocation of pre-
miums and discounts are included. The interest components
of pensions and similar obligations are also presented in this line
item.
An exception to the aforementioned principles is made for
Daimler Financial Services. In this case, the interest income and
expense and the result from derivative financial instruments
are disclosed under revenue and cost of sales respectively.