Porsche 2012 Annual Report Download - page 186

Financials
Notes to the consolidated fi nancial statements
Interest income and expenses are determined using the effective interest method for finan-
cial instruments measured at amortized cost and interest-bearing securities held for sale.
Dividend income is recognized when the group’s right to receive the payment is established.
Production-related expenses are recognized upon delivery or utilization of the service, while
all other expenses are recognized as an expense as incurred. The same applies for development
costs not eligible for recognition as part of the cost of an asset.
Contingent liabilities
A contingent liability is a possible obligation to third parties that arises from past events and
whose existence will be confirmed only by the occurrence or non-occurrence of one or more
uncertain future events not wholly within the control of the Porsche SE group. A contingent
liability may also be a present obligation that arises from past events but is not recognized be-
cause an outflow of resources is not probable or the amount of the obligation cannot be meas-
ured with sufficient reliability. The amount of contingent liabilities is only stated in cases where
the probability of an outflow of resources is not classified as remote by management.
Significant accounting judgments and estimates
The preparation of consolidated financial statements requires certain judgments and estimates
that have an effect on recognition, measurement, presentation and disclosure of assets, liabili-
ties, income and expenses as well as contingent assets and contingent liabilities. These judg-
ments and estimates reflect the current information available. Key sources of estimations at the
level of investees are thereby influencing the profit or loss from investments accounted for at
equity are the determination of the fair value of assets and liabilities for which observable market
data are not available when performing purchase price allocations, the impairment testing of
financial and non-financial assets, the useful lives and amortization or depreciation methods as
well as the measurement of pension and other provisions. Additional key sources of estimations
at the level of Porsche SE in particular include the testing of their carrying amounts of invest-
ments for impairment or any need to reverse a prior impairment (see also section "Equity ac-
counting“ under "Consolidation principles"), the measurement of provisions and contingent
liabilities (see also note [22] in particular with regard to legal disputes) and the recoverability of
receivables. In individual cases, amounts realized may differ from the estimates. The carrying
amounts of the assets and liabilities affected by estimates can be seen in the breakdowns of the
individual balance sheet items.
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