Fiat Group - Consolidated Financial Statements and Notes - Fiat SpA

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230 Consolidated Financial Statements at 31 December 2011 Notes Quantitative information on interest rate risk The manufacturing companies and treasuries of the Group make use of external funds obtained in the form of financing and invest in monetary and financial market instruments. In addition, Group companies make sales of receivables resulting from their trading activities on a continuing basis. Changes in market interest rates can affect the cost of the various forms of financing, including the sale of receivables, or the return on investments, and the employment of funds, causing an impact on the level of net financial expenses incurred by the Group. In addition, the financial services companies provide loans (mainly to customers and dealers), financing themselves using various forms of direct debt or asset-backed financing (e.g. securitisation of receivables). Where the characteristics of the variability of the interest rate applied to loans granted differ from those of the variability of the cost of the financing obtained, changes in the current level of interest rates can affect the operating profit/(loss) of those companies and the Group as a whole. In order to manage these risks, the Group uses interest rate derivative financial instruments, mainly interest rate swaps and forward rate agreements, with the object of mitigating, under economically acceptable conditions, the potential variability of interest rates on net profit/(loss). In assessing the potential impact of changes in interest rates, the Group separates out fixed rate financial instruments (for which the impact is assessed in terms of fair value) from floating rate financial instruments (for which the impact is assessed in terms of cash flows). The fixed rate financial instruments used by the Group consist principally of part of the portfolio of the financial services companies (basically customer financing and financial leases) and part of debt (including subsidised loans and bonds). The potential loss in fair value of fixed rate financial instruments (including the effect of interest rate derivative financial instruments) held at 31 December 2011, resulting from a hypothetical, unfavourable and instantaneous change of 10% in market interest rates, would have been approximately €140 million (€49 million at 31 December 2010 with respect to Continuing Operations). The increase is mainly due to the inclusion of Chrysler in the analysis. Floating rate financial instruments consist principally of cash and cash equivalents, loans provided by the financial services companies to the sales network and part of debt. The effect of the sale of receivables is also considered in the sensitivity analysis as well as the effect of hedging derivative instruments. A hypothetical, unfavourable and instantaneous change of 10% in short-term interest rates at 31 December 2011, applied to floating rate financial assets and liabilities, operations for the sale of receivables and derivative financial instruments, would have caused increased net expenses before taxes, on an annual basis, of approximately €10 million (€3 million at 31 December 2010 with respect to Continuing Operation). This analysis is based on the assumption that there is a general and instantaneous change of 10% in interest rates across homogeneous categories. A homogeneous category is defined on the basis of the currency in which the financial assets and liabilities are denominated. Quantitative information on commodity price risk The Group has entered into derivative contracts for certain commodities to hedge its exposure to commodity price risk associated with buying raw materials or other commodities used in its normal operations. In connection with the commodity price derivative contracts outstanding at 31 December 2011, a hypothetical, unfavourable and instantaneous change of 10% in the price of the commodities at that date would have caused a fair value loss of €58 million; the corresponding figure at 31 December 2010 was €1 million. The increase is essentially related to the use of commodity price derivatives by Chrysler. Quantitative information on other risks on derivative financial instruments As described in Note 21, the Group holds derivative financial instruments, whose value is linked to the price of listed shares (predominately equity swaps on Fiat shares and after the Demerger, on Fiat S.p.A. and Fiat Industrial S.p.A. shares). Although these transactions were entered into for hedging purposes, they do not qualify for hedge accounting under IFRS. As a consequence, the variability of the underlying values could have an effect on the Group’s net profit/(loss). In the event of a hypothetical, unfavourable, and instantaneous change of 10% in the underlying values, the potential loss in fair value of outstanding derivative financial instruments at 31 December 2011 linked to the Fiat S.p.A. and Fiat Industrial S.p.A: share price would have been approximately €17 million (€32 million at 31 December 2010). The decrease over the previous year is due to the different price of the share at the end of the year (which is used as a basis for the simulation) and to the lower notional amount outstanding.
36. Fair value measurement IFRS 7 requires financial instruments recognised in the statement of financial position at fair value to be classified on the basis of a hierarchy that reflects the significance of the inputs used in determining fair value. The following levels are used in this hierarchy: Level 1 – quoted prices in active markets for the assets or liabilities being measured; Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) on the market; Level 3 – inputs that are not based on observable market data. The following table provides an analysis under this hierarchy of the financial instruments measured at fair value at 31 December 2011. (€ million) Assets at fair value with changes directly in Other comprehensive income: Note Level 1 Level 2 Level 3 Total Investments at fair value with changes directly in equity (17) 116 - - 116 Investments at fair value through profit or loss (17) 149 - - 149 Other non-current securities (17) 32 - 12 44 Current securities available-for-sale Financial assets at fair value held-for-trading: (20) 52 - - 52 Current investments 33 - - 33 Current securities held for trading (20) 147 - - 147 Other financial assets (21) - 482 1 483 Total Assets 529 482 13 1,024 Other financial liabilities (21) - (401) (28) (429) Total Liabilities - (401) (28) (429) The other assets and liabilities classified in Level 3 relate to certain derivatives on commodities acquired by Chrysler for which fair value is not directly determined on the basis of observable market data. In 2011, there were no transfers from Level 1 to Level 2 or vice versa. The following table provides changes in Level 3 in 2011: Other non-current Other financial assets/ (€ million) securities (liabilities) Balances at 31 December 2010 12 - Changes in the scope of consolidation - 15 Gains/(Losses) recognised in Other comprehensive income/(loss) - (31) (Gains) and losses recognised in profit or loss - (3) Increases/(Decreases) - (8) Balances at 31 December 2011 12 (27) Changes in the scope of consolidation relate to the acquisition of Chrysler. In 2011, there were no transfers from Level 3 to other levels or vice versa. 231 Consolidated Financial Statements at 31 December 2011
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Fiat Group Consolidated Financial S
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Consolidated Statement of Comprehen
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Consolidated Statement of Financial
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Statement of Changes in Consolidate
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Consolidated Statement of Financial
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Notes to the Consolidated Financial
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Associates Associates are enterpris
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Intangible assets Goodwill Goodwill
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If indications of impairment are pr
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Sales of receivables The Group sell
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Revenue recognition Revenue is reco
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Business combinations As discussed
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Accounting standards, amendments an
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Scope of consolidation Fiat Demerge
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The main aggregate amounts related
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Finally, in January 2012 Fiat annou
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Goodwill arising from the acquisiti
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Composition and principal changes 1
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Reconciliation to the income statem
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The reconciliation between the tax
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In particular, at 31 December 2011
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The figures used to determine dilut
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For the Ferrari sector, the cash-ge
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In 2011 and in 2010 changes in the
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In 2011 and 2010, Changes in accumu
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Fiat Group - Consolidated Financial Statements and Notes - Fiat SpA

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