2006 Annual Report - Fiat SpA

Composition and principal changes
Income Statement
1. Dividends and other income from investments
Dividends and other income from investments can be analysed as follows:
(in thousands of euros) 2006 2005
Dividends distributed by subsidiaries:
- IHF - Internazionale Holding Fiat S.A. 258,967 –
- Fiat Finance S.p.A. 75,000 –
- Itedi S.p.A. 12,000 –
Total dividends distributed by subsidiaries 345,967 –
Dividends distributed by other companies 16,452 7,714
Total Dividends and other income from investments 362,419 7,714
Dividends distributed by other companies in 2006 consist of dividends paid by Mediobanca S.p.A. (8,702 thousand euros),
Consortium S.r.l. (6,618 thousand euros) and Fin. Priv. S.r.l. (1,132 thousand euros).
2. (Impairment losses) reversals of impairment losses of investments
Impairment losses and reversals of impairment losses of investments can be analysed as follows:
(in thousands of euros) 2006 2005
Reversals of impairment losses:
- Fiat Partecipazioni S.p.A. 1,388,000 –
- Iveco S.p.A. 945,814 –
- Fiat Netherlands Holding N.V. 95,536 376,100
- Magneti Marelli Holding S.p.A. – 144,221
- Fiat USA Inc. – 4,017
- Fiat Finance North America Inc. – 2,415
Total Reversals of impairment losses 2,429,350 526,753
Impairment losses:
- Business Solutions S.p.A. – (52,056)
- Teksid S.p.A. – (52,986)
- Comau S.p.A. (330,000) (41,800)
- Fiat Partecipazioni S.p.A. – (810,700)
Total Impairment losses (330,000) (957,542)
Total (Impairment losses) reversals of impairment losses 2,099,350 (430,789)
This item consists of the impairment losses or reversals of impairment losses arising from the application of the cost method
in accordance with IAS 27 and IAS 36.
252 Fiat S.p.A. Financial Statements at December 31, 2006 - Notes to the Financial Statements
In particular as the investments are not listed and a market value (fair value less costs to sell) cannot be reliably measured, their
recoverable amount in measuring impairment losses and the reversal of impairment losses has been taken as their value in use.
The value in use of an investment is determined by estimating the present value of the estimated cash flows expected to arise
from the results of the investment and from the estimated value of a hypothetical ultimate disposal, in line with the requirements
of paragraph 33 of IAS 28. In calculating this value in use, the forecast included in the business plans of the individual Group
Sectors are taken into consideration, as attributed to the investments, increased by their terminal value, adjusted to take account
of the risks and uncertainties inherent in the assumptions on which these plans are based. These results and the terminal value
are then discounted to present value by applying a rate that is representative of the cost of equity, which varies between 11%
and 16% depending on the characteristics of the Sector under consideration.
The investment in Fiat Partecipazioni S.p.A. was impaired in previous years by a total of 5,403,000 thousand euros, which reflects
for the most part losses incurred in the Fiat Auto Sector, held as an investment by Fiat Partecipazioni S.p.A. through the
subholding Fiat Auto Holdings B.V. As a result of the fact that the Fiat Auto Sector has returned to profitability in 2006 and due to
positive future forecasts, the value in use of the investment in that company has been estimated to be approximately 3.3 billion
euros, taking into consideration the above-mentioned adjustments, which was then compared with its carrying amount in Fiat
Partecipazioni S.p.A. of approximately 2.1 billion euros. The difference of approximately 1.2 billion euros, taken together with the
cash flows generated at Fiat Partecipazioni S.p.A. (earned moreover from the gains realised on the sale of investments considered
by the Group to be non-strategic), has given rise to a reversal of 1,388,000 thousand euros of the previous impairment loss. The
residual part of the accumulated impairment loss recognised in prior years which is available for reversal in future years amounts
to 4,015,000 thousand euros, as reported in Note 13.
The investment in 60.56% of the capital of Iveco S.p.A. (the remaining 39.44% is held by Fiat Partecipazioni S.p.A.) was transferred
to Fiat S.p.A. during the year from Fiat Netherlands Holding N.V. under a regime whereby the carrying amounts were left
unchanged throughout the operation, as described further in Note 13. On the basis of grounds similar to those used for Fiat Auto
S.p.A., impairment losses of 945,814 thousand euros recognised in prior years and implicitly reflected in the book value transferred
were reversed. The value in use of the investment held is actually greater than the carrying value that has been reinstated, and
amounting to 1,593,290 thousand euros.
In a similar manner the part of the write-down of the investment in Fiat Netherlands Holding N.V. attributable to its holding
in CNH Global N.V. and amounting to 95,536 thousand euros has been fully reversed.
The write-down of the investment in Comau S.p.A., carried out using the same approach, was affected by the losses incurred
by the Sector in 2006 as the result of the steps taken to restructure the company and reshape its operations.
3. Gains (losses) on the disposal of investments
Net gains amount to 425 thousand euros in 2006, representing an improvement of 1,725 thousand euros compared to 2005.
The 2006 figure mainly includes the gains on the sale of minor investments within the Group.
Net losses of 1,300 thousand euros were realised from the disposal of investments in 2005, arising from price settlements
on the sale of minor investments.
Fiat S.p.A. Financial Statements at December 31, 2006 - Notes to the Financial Statements 253