Fiat Group - Consolidated Financial Statements and Notes - Fiat SpA

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146 Consolidated Financial Statements at 31 December 2011 Notes Loans and receivables which are not held by the Group for trading (loans and receivables originating in the course of business), held-tomaturity securities and all financial assets for which published price quotations in an active market are not available and whose fair value cannot be determined reliably, are measured, to the extent that they have a fixed term, at amortised cost, using the effective interest method. When the financial assets do not have a fixed term, they are measured at acquisition cost. Receivables with maturities of over one year which bear no interest or an interest rate significantly lower than market rates are discounted using market rates. Assessments are made regularly as to whether there is any objective evidence that a financial asset or group of assets may be impaired. If any such evidence exists, an impairment loss is included in the income statement for the period. Except for derivative instruments, financial liabilities are measured at amortised cost using the effective interest method. Financial assets and liabilities hedged against changes in fair value (fair value hedge) are measured in accordance with hedge accounting principles: gains and losses arising from remeasurement at fair value, due to changes in the respective hedged risk, are recognised in the income statement and are offset by the effective portion of the loss or gain arising from remeasurement at fair value of the hedging instrument. Derivative financial instruments Derivative financial instruments are used for hedging purposes, in order to reduce currency, interest rate and market price risks (primarily concerning commodities and securities). In accordance with IAS 39, derivative financial instruments qualify for hedge accounting only when at the inception of the hedge there is formal designation and documentation of the hedging relationship, the hedge is expected to be highly effective, its effectiveness can be reliably measured and it is highly effective throughout the financial reporting periods for which it is designated. All derivative financial instruments are measured in accordance with IAS 39 at fair value. When derivative financial instruments qualify for hedge accounting, the following accounting treatment applies: Fair value hedges – Where a derivative financial instrument is designated as a hedge of the exposure to changes in fair value of a recognised asset or liability that is attributable to a particular risk and could affect the income statement, the gain or loss from remeasuring the hedging instrument at fair value is recognised in the income statement. The gain or loss on the hedged item attributable to the hedged risk adjusts the carrying amount of the hedged item and is recognised in the income statement. Cash flow hedges – Where a derivative financial instrument is designated as a hedge of the exposure to variability in future cash flows of a recognised asset or liability or a highly probable forecasted transaction and could affect the income statement, the effective portion of any gain or loss on the derivative financial instrument is recognised directly in other comprehensive income. The cumulative gain or loss is removed from other comprehensive income and recognised in the income statement at the same time as the economic effect arising from the hedged item affects income. The gain or loss associated with a hedge or part of a hedge that has become ineffective is recognised in the income statement immediately. When a hedging instrument or hedge relationship is terminated but the hedged transaction is still expected to occur, the cumulative gain or loss realised to the point of termination remains in other comprehensive income and is recognised in the income statement at the same time as the underlying transaction occurs. If the hedged transaction is no longer probable, the cumulative unrealised gain or loss held in other comprehensive income is recognised in the income statement immediately. Hedges of a net investment – If a derivative financial instrument is designated as a hedging instrument for a net investment in a foreign operation, the effective portion of the gain or loss on the derivative financial instrument is recognised in other comprehensive income. The cumulative gain or loss is reclassified from other comprehensive income to profit or loss on the disposal of the foreign operation. If hedge accounting cannot be applied, the gains or losses from the fair value measurement of derivative financial instruments are recognised immediately in the income statement.
Sales of receivables The Group sells certain of its financial, trade and tax receivables, mainly through factoring transactions. Factoring transactions may be with or without recourse to the seller; certain factoring agreements without recourse include deferred purchase price clauses (i.e. the payment of a minority portion of the purchase price is conditional upon the full collection of the receivables), require a first loss guarantee of the seller up to a limited amount or imply a continuing significant exposure to the cash flows of the sold receivables. These kinds of transactions do not meet IAS 39 requirements for assets derecognition, since the risks and rewards have not been substantially transferred. Consequently, all receivables sold through factoring transactions which do not meet IAS 39 derecognition requirements are recognised as such in the Group financial statements even though they have been legally sold; a corresponding financial liability is recorded in the consolidated statement of financial position as Asset-backed financing. Gains and losses relating to the sale of such assets are not recognised until the assets are removed from the Group statement of financial position. Inventories Inventories of raw materials, semi-finished products and finished goods, (including assets sold with a buy-back commitment) are stated at the lower of cost and net realisable value, cost being determined on a first in-first-out (FIFO) basis. The measurement of inventories includes the direct costs of materials, labour and indirect costs (variable and fixed). Provision is made for obsolete and slow-moving raw materials, finished goods, spare parts and other supplies based on their expected future use and realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs for sale and distribution. The measurement of construction contracts is based on the stage of completion determined as the proportion that cost incurred to the balance sheet date bears to the estimated total contract cost. These items are presented net of progress billings received from customers. Any losses on such contracts are fully recorded in the income statement when they become known. Assets and liabilities held for sale and Discontinued Operations Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the non-current asset (or disposal group) is available for immediate sale in its present condition. When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Group will retain a non-controlling interest in its former subsidiary after the sale. Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amounts and fair value less costs to sell. Employee benefits The present value of a defined benefit obligation and the related current service cost for defined benefit pension plans and other longterm benefits are determined on an actuarial basis using the projected unit credit method. Under this method, the Group attributes benefits to periods in which the obligation to provide post-employment benefits arise. That obligation arises when employees render services. The present value of the defined benefit obligation is measured by using actuarial techniques and actuarial assumptions that are unbiased and mutually compatible. Financial assumptions are based on market estimates that are known at the balance sheet date regarding the period in which the obligations will be settled. The fair value of plan assets is deducted from the present value of the obligation in determining the amount recognised in the statement of financial position. This fair value is estimated, where possible, by referring to available market price of the assets, where no market price is available, the fair value of plan assets is estimated using a valuation technique. 147 Consolidated Financial Statements at 31 December 2011
Page 1 and 2: Fiat Group Consolidated Financial S
Page 3 and 4: Consolidated Statement of Comprehen
Page 5 and 6: Consolidated Statement of Financial
Page 7 and 8: Statement of Changes in Consolidate
Page 9 and 10: Consolidated Statement of Financial
Page 11 and 12: Notes to the Consolidated Financial
Page 13 and 14: Associates Associates are enterpris
Page 15 and 16: Intangible assets Goodwill Goodwill
Page 17: If indications of impairment are pr
Page 21 and 22: Revenue recognition Revenue is reco
Page 23 and 24: Business combinations As discussed
Page 25 and 26: Accounting standards, amendments an
Page 27 and 28: Scope of consolidation Fiat Demerge
Page 29 and 30: The main aggregate amounts related
Page 31 and 32: Finally, in January 2012 Fiat annou
Page 33 and 34: Goodwill arising from the acquisiti
Page 35 and 36: Composition and principal changes 1
Page 37 and 38: Reconciliation to the income statem
Page 39 and 40: The reconciliation between the tax
Page 41 and 42: In particular, at 31 December 2011
Page 43 and 44: The figures used to determine dilut
Page 45 and 46: For the Ferrari sector, the cash-ge
Page 47 and 48: In 2011 and in 2010 changes in the
Page 49 and 50: In 2011 and 2010, Changes in accumu
Page 51 and 52: Additions of €3,925 million in 20
Page 53 and 54: Disposals and other changes, showin
Page 55 and 56: At 31 December 2011, Inventories in
Page 57 and 58: Receivables from financing activiti
Page 59 and 60: The fair value of derivative financ
Page 61 and 62: In respect of derivative financial
Page 63 and 64: Key financial and income statement
Page 65 and 66: As a result of the above-mentioned
Page 67 and 68: In order to maintain the necessary
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Non-controlling interest The non-co
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Changes during the year were as fol
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26. Provisions for employee benefit
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Other provisions for employees and
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The amounts recognised in the state
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Change in the scope of consolidatio
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The warranty provision represents t
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The annual interest rates and the n
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The bonds issued by the Fiat Group
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Payables represented by securities
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29. Trade payables Trade payables o
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32. Guarantees granted, commitments
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Instead, when it is probable that a
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(€ million) FGA Maserati Ferrari
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(€ million) FGA Maserati Ferrari
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In order to test for impairment, si
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Counterparties to these agreements
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36. Fair value measurement IFRS 7 r
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The main effects on profit and loss
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An analysis of the effects of relat
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Appendix I Fiat Companies at 31 Dec
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SubSidiarieS conSolidated on a line
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JoInTly-ConTRollED EnTITIES ACCoUnT
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Name Registered Office Country Shar
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SUbSIDIARIES VAlUED AT CoST (contin
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ASSoCIATED CoMpAnIES VAlUED AT CoST
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Attestation of the Consolidated Fin
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Fiat Group - Consolidated Financial Statements and Notes - Fiat SpA

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