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No reserve is booked for taxes payable on intercompany dividends,
where the distribution of consolidated companies’ retained earnings is
not planned, as these amounts are considered as having been
permanently reinvested.
o) Inventories
Finished goods and work-in-progress are stated at the lower of cost or
market. Market is defined as current replacement cost, by purchase or
reproduction, provided that said cost does not exceed net realizable
value. Cost is determined by the First-In First-Out (FIFO) method and
includes direct and indirect production costs based on normal activity
levels.
p) Credit losses
Credit losses are analyzed by the manufacturing and sales companies at
each period end and allowances are booked, where appropriate, to
cover the estimated risk of non-recovery.
Allowances for credit losses recorded by the finance companies are
charged to income as follows:
- retail financing: an allowance is booked when a retail installment
contract is obtained, based on a historical and prospective evaluation
of risk, and is periodically adjusted to take account of changes in the
estimated risk;
- wholesale financing: an allowance based on historical statistics is
booked on average outstanding balances during the year and is
increased in the case of specifically identified risks.
As soon as a finance receivable is deemed irrecoverable, it is written off
against the previously booked allowance for credit losses after taking into
consideration the potential recovery from the guarantor and the value at
which the repossessed vehicle is recorded in the balance sheet (at the
lower of the net investment in the receivable and its estimated market
value). In addition, recognition of financing revenue is suspended.
q) Cash and cash equivalents
This item consists solely of current account balances, trading securities
(securities quoted on organized markets that are acquired with the
intention of being held for periods not exceeding three months), units
in money market funds which can be sold at short notice and
marketable securities with maturities of less than three months.
Effective from 2002, cash advances granted to companies accounted
for by the equity method, which were previously reported under “Cash
and cash equivalents”, are included in “Short-term loans”. The
corresponding amounts reported under “Cash and cash equivalents” in
2001 and 2000 have not been reclassified as the amounts involved are
not material (note 28-a).
r) Pension and other retirement benefits
In addition to pension benefits paid in accordance with the laws and
regulations of the countries in which they operate, Group companies are
liable for the payment of supplementary pensions and retirement benefits.
The related accounting policy and calculations are provided in note 46.
Retirement benefit obligations funded by reserves concern:
- long-service awards payable by French subsidiaries (note 46-b)
- healthcare costs paid by certain subsidiaries in the United States
(note 46-c).
s) Own shares
1. Shares held for allocation on exercise of employee
stock options
Peugeot S.A. shares and the shares of subsidiaries that are being held
for allocation on exercise of employee stock options are carried at cost
under “Short-term investments”. An allowance is booked where
required to cover the difference between the cost of these shares and
the lower of the exercise price of the related options and the market
value at year end.
2. Peugeot S.A. treasury stock
Own shares acquired by the Group for any purpose other than for
allocation on exercise of stock options are recorded as a reduction in
stockholders’ equity, at cost, under “Treasury stock”.
The proceeds from sales of treasury stock are credited directly to
stockholders’ equity and any disposal gains or losses therefore have no
impact on the statement of income.
➔ Note 2 - Effect of applying US GAAP
a) Effect on stockholders’ equity and net income
Certain principles generally accepted in the United States of America
(US GAAP) are not acceptable under French accounting principles and
have therefore not been applied by the Group. The effect on stockholders’
equity and net income of applying US GAAP is presented below:
1. Main differences
Early-termination plan costs
The cost of the early-termination plan was recognized in full in the
consolidated statement of income for the year ended December 31, 1999,
in accordance with French accounting standards. The plan did not
meet certain of the criteria for recognition of the related cost in
1999 under US GAAP.
Additional minimum pension liability
Statement of Financial Accounting Standards (SFAS) no. 87 requires
the recognition of an additional minimum liability if the sum of the
reserves recorded in the balance sheet and the fair value of plan assets
represent less than the accumulated benefit obligation. The portion of
the additional minimum liability corresponding to prior service cost
and the unamortized transition obligation is debited to “Intangible
assets” and any remaining balance is recorded as a reduction in
stockholders’ equity, under “Other comprehensive income”, net of tax.
At December 31, 2002, 2001 and 2000, the pre-tax amounts involved
were as follows:
(in millions of euros) 2002 2001 2000
Contra entry
- Intangible assets 54 33 -
- Stockholders’ equity 587 80 -
Total additional minimum liability 641 113 -
Recognition of restructuring reserves
A reserve for restructuring costs is booked when the restructuring plan
is decided by management and its implementation is not subject to
certain conditions being met.
PSA PEUGEOT CITROËN - APPENDICES TO THE MANAGING BOARD REPORT 141