Mercedes 2013 Annual Report Download - page 197

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F | Consolidated Financial Statements | Notes to the Consolidated Financial Statements
Available-for-sale financial assets. Available-for-sale financial
assets are non-derivative financial assets that are designated
as available for sale or that are not classified in any of the
preceding categories. This category includes equity instruments
and debt instruments such as government bonds, corporate
bonds and commercial paper.
After initial measurement, available-for-sale financial assets
are measured at fair value, with unrealized gains or losses being
recognized in other comprehensive income/loss. If objective
evidence of impairment exists or if changes occur in the fair value
of a debt instrument resulting from currency fluctuations,
these changes are recognized in profit or loss. Upon disposal
of financial assets, the accumulated gains and losses recog-
nized in other comprehensive income/loss resulting from mea-
surement at fair value are recognized in profit or loss. If a reli-
able estimate cannot be made of the fair value of an unquoted
equity instrument, such as an investment in a German limited
liability company, this instrument is measured at cost (less any
impairment losses). Interest earned on available-for-sale
financial assets is generally reported as interest income using
the effective interest method. Dividends are recognized in
profit or loss when the right of payment has been established.
Cash and cash equivalents. Cash and cash equivalents consist
primarily of cash on hand, checks and demand deposits at
banks, as well as debt instruments and certificates of deposits
with a remaining term when acquired of up to three months,
which are not subject to any material value fluctuations. Cash
and cash equivalents correspond with the classification
in the consolidated statement of cash flows.
Impairment of financial assets. At each reporting date, the
carrying amounts of financial assets other than those to be mea-
sured at fair value through profit or loss are assessed to
determine whether there is objective evidence of impairment.
Objective evidence may exist for example if a debtor is facing
serious financial difficulties or there is a substantial change in
the debtor’s technological, economic, legal or market environ-
ment. For quoted equity instruments, a significant or prolonged
decline in fair value is additional objective evidence of possible
impairment. Daimler has defined criteria for the significance and
duration of a decline in fair value. A decline in fair value is
deemed significant if it exceeds 20% of the carrying amount
of the investment; a decline is deemed prolonged if the
carrying amount exceeds the fair value for a period longer
than nine months.
Loans and receivables. If there are objective indications that
the value of a loan or receivable has been impaired, the
amount of the impairment loss is measured as the difference
between the carrying amount of the asset and the present
value of expected future cash flows (excluding expected future
credit losses that have not yet been incurred), discounted
at the original effective interest rate of the financial asset.
The amount of the impairment loss is recognized in profit or loss.
If, in a subsequent reporting period, the amount of the impair-
ment loss decreases and the decrease can be attributed
objectively to an event occurring after the impairment was
recognized, the impairment loss recorded in prior periods
is reversed and recognized in profit or loss.
In most cases, an impairment loss on loans and receivables
(e.g. receivables from financial services including finance
lease receivables and trade receivables) is recorded using allow-
ance accounts. The decision to account for credit risks using
an allowance account or by directly reducing the receivable
depends on the estimated probability of the loss of receivables.
Available-for-sale financial assets. If an available-for-sale
financial asset is impaired, the difference between its cost
(net of any principal payment and amortization) and its
current fair value (less any impairment loss previously recog-
nized in the statement of income) is reclassified from other
comprehensive income/loss to the statement of income. Rever-
sals with respect to equity instruments classified as available
for sale are recognized in other comprehensive income/loss.
Reversals of impairment losses on debt instruments are
reversed through the statement of income if the increase in fair
value of the instrument can be objectively attributed to an
event occurring after the impairment losses were recognized
in the consolidated statement of income.
Offsetting financial instruments. Financial assets and
financial liabilities are offset and the net amount is presented
in the consolidated statement of financial position provided
that an enforceable right currently exists to offset the amounts
involved, and there is an intention either to carry out the
offsetting on a net basis or to settle a liability when the related
asset is sold.