Mercedes 2013 Annual Report Download - page 247

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F | Consolidated Financial Statements | Notes to the Consolidated Financial Statements
Receivables from financial services. Daimler’s financing and
leasing activities are primarily focused on supporting the
sales of the Group’s automotive products. As a consequence
of these activities, the Group is exposed to credit risk, which
is monitored and managed based on defined standards, guide-
lines and procedures. Daimler Financial Services manages
its credit risk irrespective of whether it is related to a financing
contract or to an operating lease or a finance lease contract.
For this reason, statements concerning the credit risk of Daimler
Financial Services refer to the entire financing and leasing
business, unless specified otherwise.
Exposure to credit risk from financing and lease activities
is monitored based on the portfolio subject to credit risk.
The portfolio subject to credit risk is an internal control quantity
that consists of wholesale and retail receivables from finan-
cial services and the portion of the operating lease portfolio that
is subject to credit risk. Receivables from financial services
comprise claims arising from finance lease contracts and repay-
ment claims from financing loans. The operating lease port-
folio is reported under “Equipment on operating leases” in the
Group’s consolidated financial statements. Overdue lease
payments from operating lease contracts are recognized in trade
receivables.
In addition, the Daimler Financial Services segment is exposed
to credit risk from irrevocable loan commitments to retailers
and end customers. At December 31, 2013, irrevocable loan
commitments of Daimler Financial Services amounted to
€1,407 million (2012: €990 million), of which €1,004 million had
a maturity of less than one year (2012: €640 million), €244
million had maturities between one and three years (2012: €176
million), €83 million had maturities between three and four
years (2012: €133 million) and €76 million had maturities between
four and five years (2012: €41 million).
The Daimler Financial Services segment has guidelines setting
the framework for effective risk management at a global as
well as at a local level. In particular, these rules deal with mini-
mum 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, 2013, exposure
to the top 15 customers did not exceed 4.1% (2012: 3.9%)
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.
The financed vehicles usually 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 eval-
uation 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 advance
payments, guarantees and, to a lower extent, residual
debt insurances, are essential elements for credit decisions.
Significant loans and leases to corporate customers are tested
individually for impairment. An individual loan or 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 lease receivables may be 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 default.
Maximum risk positions of financial assets and loan commitments
See also
Note
Maximum
risk position
2013
Maximum
risk position
2012
In millions of euros
Liquid assets 18,119 16,594
Receivables from financial
services 14
50,770
49,060
Trade receivables 19 7,803 7,543
Derivative financial instruments
used in hedge accounting
(assets only) 16
1,703
1,364
Derivative financial instruments
not used in hedge accounting
(assets only)
16
350
341
Loan commitments 30 1,508 1,022
Other receivables and
financial assets 16
2,136
2,224
F.89