Porsche 2009 Annual Report Download - page 158

158 Financials
Financial assets are subject to an impairment test if there is objective evidence that the as-
set is permanently impaired. An impairment loss is immediately recorded as an expense.
Specific and portfolio-based valuation allowances are recognized for the risk of default in-
herent in receivables and loans from financial services.
For significant individual receivables (for example receivables from dealer financing or from
fleet customers), specific valuation allowances are recognized by applying uniform guidelines and
are measured at the amount of incurred losses. Indicators of a potential impairment include delayed
payments over a certain period of time, the institution of enforcement measures, the threat of
insolvency or over-indebtedness, application for or the opening of insolvency proceedings or the
failure of financial reorganization measures.
In the case of non-significant receivables (such as receivables from customer financing), a
standardized approach is used in general to calculate the specific valuation allowances after the
impairment has been identified.
Portfolio-based valuation allowances are recognized by grouping together non-significant
receivables and significant individual receivables for which there is no indication of impairment into
homogeneous portfolios on the basis of comparable credit risk features and allocating them by risk
class. As long as no definite information is available about which receivable is in default, average
historical default probabilities for the portfolio concerned are used to calculate the amount of the
valuation allowances.
For receivables in the automotive sector, valuation allowances are determined by recogniz-
ing individual valuation allowances.
Allowances are generally recognized in separate allowance accounts and give rise to im-
pairment losses that are recognized in profit or loss.
An impairment loss is recognized on available-for-sale financial assets if there is objective
evidence of permanent impairment. In the case of equity instruments, evidence of impairment is
considered to exist, among other things, if the fair value decreases significantly below cost and the
decrease in fair value is prolonged. Where there is evidence of impairment, the cumulative loss of
available-for-sale financial instruments – measured as the difference between cost and their current
fair value, less any impairment loss previously recognized on that financial instrument in the income
statement – is derecognized from equity and recognized in the income statement. Any increase in
the value of debt securities at a later date is accounted as a reversal of the impairment loss recog-
nized in profit or loss. In the case of equity instruments, reversals of impairment losses are recog-
nized directly in equity.