Mercedes 2013 Annual Report Download - page 199

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F | Consolidated Financial Statements | Notes to the Consolidated Financial Statements
The discount factors used to calculate the present values
of defined benefit pension obligations 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.
For very long maturities, there are no high-quality corporate
bonds available as a benchmark. The respective discount factors
are estimated by extrapolating current market rates along
the yield curve.
Gains or losses on the curtailment or settlement of a defined
benefit plan are recognized when the curtailment or settlement
occurs.
Provisions for other risks and contingent liabilities.
A provision is recognized when a liability to third parties has
been incurred, an outflow of resources is probable and
the amount of the obligation can be reasonably estimated.
The amount recognized as a provision represents the best
estimate of the obligation at the balance sheet date. Provisions
with an original maturity of more than one year are discounted
to the present value of the expenditures expected to settle the
obligation at the end of the reporting period. Provisions
are regularly reviewed and adjusted as further information
becomes available or circumstances change.
A provision for expected warranty costs is recognized when
a product is sold, upon lease inception, or when a new
warranty program is initiated. Estimates for accrued warranty
costs are primarily based on historical experience.
Daimler records the fair value of an asset retirement obligation
from the period in which the obligation is incurred.
Restructuring provisions are set up in connection with programs
that materially change the scope of business performed
by a segment or business unit or the manner in which business
is conducted. In most cases, restructuring expenses include
termination benefits and compensation payments due to the
termination of agreements with suppliers and dealers.
Restructuring provisions are recognized when the Group has
a detailed formal plan that has either commenced imple-
mentation or been announced.
Share-based payment. Share-based payment comprises
cash-settled liability awards and equity-settled equity awards.
The fair value of equity awards is generally determined by
using a modified Black-Scholes option pricing model at grant
date and represents the total payment expense to be recog-
nized during the service period with a corresponding increase
in equity (paid-in capital).
Liability awards are measured at fair value at each balance
sheet date until settlement and are classified as provisions.
The expense of the period comprises the addition to and/or
the reversal of the provision between two balance sheet
dates and the dividend equivalent paid during the period, and
is included in the functional costs.
Presentation in the consolidated statement of cash flows.
Interest paid as well as interest and dividends received are
classified as cash provided by/used for operating activities.
The cash flows from short-term marketable debt securities
with high turnover rates and significant amounts are offset and
presented within cash used for investing activities.
2. Accounting estimates and assessments
In the consolidated financial statements, to a certain degree,
estimates, assessments and assumptions have to be made
which can affect the amounts and reporting of assets and liabili-
ties, the reporting of contingent assets and liabilities on the
balance sheet date and the amounts of income and expense
reported for the period. The major items affected by such
estimates, assessments and assumptions are described as
follows. Actual amounts may differ from the estimates.
Changes in the estimates, assessments and assumptions can
have a material impact on the consolidated financial statements.
Recoverable amounts of cash-generating units and invest-
ments accounted for using the equity method. In the
context of impairment tests for non-financial assets, estimates
have to be made to determine the recoverable amounts of
cash-generating units. Assumptions have to be made in partic-
ular with regard to future cash inflows and outflows for the
planning period and the following periods. The estimates include
assumptions regarding future market share and the growth
of the respective markets as well as regarding the products’
profitability. On the basis of the impairment tests carried
out in 2013, the recoverable amounts are substantially larger
than the net assets of the Group’s cash-generating units.