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Certain restructuring measures do not fulfil the more stringent recognition criteria contained in American accounting standard EITF 94.3. Write-off of restructuring costs against goodwill Under French GAAP (CRC 99-02), reserves to cover the cost of restructuring newly-acquired subsidiaries can be charged against the related goodwill in some circumstances. This alternative accounting treatment of restructuring reserves is specific to France and does not exist in US GAAP. Development costs to be billed to customers included in inventory Certain Automotive Equipment development costs that are to be billed to customers are included in the cost of inventory. Under US accounting standard EITF 99-05, effective from 2000, these types of costs may not be capitalized if certain conditions are not met. EITF 99-05 did not require prior years’ financial statements to be restated to take account of this change of method. The effect of the change of method on the 2000 financial statements was therefore limited to the restatement of goodwill in the opening balance sheet of the Sommer Allibert Group. Goodwill - Recognition Under French accounting standards, adjustments to goodwill may be made up to the end of the fiscal year following the year of acquisition. Under US GAAP, the maximum period is twelve months. - Amortization Under French accounting standards, goodwill is amortized over a maximum of twenty years and an impairment loss is recognized where necessary. Effective from January 1, 2002, goodwill and certain intangible assets may not be amortized under US GAAP (SFAS 142). SFAS 142 requires companies to identify reporting units and to test goodwill for impairment at least annually using a two-step process. The first step is a screen for potential impairment and the second step measures the amount of impairment, if any. At December 31, 2002, the Group screened its principal reporting units. The screening process did not reveal any potential impairment of the related goodwill at that date. Securitization During the year, the Group sold portfolios of automobile loans through securitization operations described in note 23. The impact of these transactions on earnings for the year was not material. Under US GAAP applicable to transfers of financial assets, the retained interest must be recorded under assets at fair value. Fair value is determined based on estimated discounted future cash flows from the retained interest, taking into account experience-based expected early repayment and credit loss rates. Early repayment and credit loss assumptions are based on the least favorable rates observed over the past four or five years. The discount rate applied includes a risk premium reflecting the variability of these parameters. The gain on the sale of the finance receivables takes into account the retained interest carried in the balance sheet and the original net book value of the assets and liabilities corresponding to the transferred assets. Derivative instruments and hedging activities Under French GAAP, derivative instruments that qualify for hedge accounting may not be valued by the mark-to-market method. Statement of Financial Accounting Standards (SFAS) no. 133 “Accounting for Derivative Instruments and Hedging Activities” is applicable effective from fiscal 2001. The procedures applied by the Group to manage currency and interest rate risks are described in note 47. The effect of applying SFAS 133 on opening stockholders’ equity as of January 1, 2001 is shown separately from the effects on the accounts for the years ended December 31, 2001 and 2002. The €22 million effect on 2002 income includes a €3 million loss related to the ineffective portion of fair value hedges, and a €25 million profit corresponding to changes in the fair value of instruments that do not qualify for hedge accounting under SFAS 133. The total effect on 2001 income was €13 million, including, respectively, a €3 million loss and a €16 million profit. Reserve for debenture redemption premiums Amounts released from this reserve in respect of debentures converted into common stock during the year are credited to income. Under US GAAP, the net-of-tax amount should be credited directly to stockholders’ equity, without impacting the statement of income. Unrealized gains and losses on marketable securities Marketable securities are stated at cost and an allowance is booked to cover any permanent impairment in value. Under US GAAP, marketable securities for which there is a liquid market are marked to market and the resulting unrealized gain or loss, net of tax is posted directly to stockholders’ equity without impacting the statement of income. Own shares held in connection with stock option plans Own shares that are being held for allocation on exercise of employee stock options are carried at cost under “Short-term investments”. Under US GAAP these shares are deducted from stockholders’ equity at cost under “Treasury stock”. 142 PSA PEUGEOT CITROËN - APPENDICES TO THE MANAGING BOARD REPORT
2. Effect on stockholders’ equity (in millions of euros) 2002 2001 2000 Stockholders’ equity according to French GAAP 10,984 10,282 9,361 Additional minimum pension liability (587) (80) - Restructuring costs - Recognition of reserves 43 21 - - Restructuring costs written off against goodwill (12) (12) - Development costs to be billed to customers included in inventory - Internal developments (143) (91) (16) - Acquired developments (1) (1) - Goodwill - Additional goodwill recognized during the year on prior year acquisitions (94) - - - Amortization of goodwill 128 - - Securitization 46 23 - Derivative instruments and hedging activities - Effect on balance sheet at January 1, 2001 (13) (13) N/A - Effect on the financial statements for 2001 and 2002 35 13 N/A Unrealized gains and losses on marketable securities 292 483 - Own shares held in connection with stock option plans (112) (64) - Income taxes 41 (130) 3 Minority interests 34 17 6 Stockholders’ equity according to US GAAP 10,641 10,448 9,354 3. Impact on net income (in millions of euros) 2002 2001 2000 Net income according to French GAAP 1,690 1,691 1,312 Reserve for early-termination costs - - (431) Restructuring costs - Recognition of reserves 22 21 - - Restructuring costs written off against goodwill - (12) - Development costs to be billed to customers included in inventory - Internal developments (52) (75) (16) - Acquired developments - (1) - Goodwill - Additional goodwill recognized during the year on prior year acquisitions (94) - - - Amortization of goodwill 128 - - Securitization 23 23 - Reserve for debenture redemption premiums - (27) (26) Derivative instruments and hedging activities - Effect on balance sheet at January 1, 2001 - (13) N/A - Effect on the financial statements for 2001 et 2002 22 13 N/A Income taxes (60) 21 175 Minority interests 9 9 6 Net income according to US GAAP 1,688 1,650 1,020 Basic earnings per €1 par value share* 6.70 6.29 3.91 Diluted earnings per €1 par value share* 6.70 6.27 3.74 * 2000 earnings per share figures have been adjusted for the six-for-one stock-split. The average number of shares outstanding (note 50) excludes own shares recorded under “Short-term investments”. b) Comprehensive income Comprehensive income is calculated in accordance with SFAS 130 as follows: (in millions of euros) 2002 2001 2000 Net income according to US GAAP 1,688 1,650 1,020 Translation adjustment (177) (204) 22 Additional minimum pension liability (507) (80) - Reserve for debenture redemption premiums - 27 26 Unrealized gains and losses on marketable securities (191) 483 (62) Deferred taxes 232 (155) (10) Minority interests 8 - - Comprehensive income 1,053 1,721 996 PSA PEUGEOT CITROËN - APPENDICES TO THE MANAGING BOARD REPORT 143
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2002 ANNUAL REPORT
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K ey figures Worldwide sales Automo
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Contents 2 A Tribute to Pierre Peug
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A Tribute to Pierre Peugeot Our Gro
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M essage from the Chairmen is alrea
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plan defined by the Managing Board.
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10 Growth Strategy 16 Corporate Gov
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Growth Strategy 12 • One Group, t
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Growth Strategy Corporate Governanc
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Corporate Governance 18 21 22 • T
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Business Review 30 34 44 48 52 56 O
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Corporate Policies 62 Human Resourc
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Page 95 and 96: Growth Strategy Corporate Governanc
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Page 135 and 136: Appendices to the Managing Board Re
Page 137 and 138: C onsolidated statements of income
Page 139 and 140: C onsolidated balance sheets - Liab
Page 141 and 142: C onsolidated statements of stockho
Page 143 and 144: ➔ Note 1 - Accounting policies Th
Page 145: No reserve is booked for taxes paya
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Page 151 and 152: 2000 (in millions of euros) Automot
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Page 155 and 156: ➔ Note 12 - Operating expenses -
Page 157 and 158: ➔ Note 15 - Intangible assets Int
Page 159 and 160: Unrealized gains on restricted stoc
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Page 167 and 168: ➔ Note 34 - Other long-term borro
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Page 171 and 172: ➔ Note 42 - Net financial positio
Page 173 and 174: 1. Automobile division An early-ter
Page 175 and 176: - Changes during the year (in milli
Page 177 and 178: The entire debt is converted to flo
Page 179 and 180: 2. Maturities of hedging instrument
Page 181 and 182: ➔ Note 50 - Commitments and conti
Page 183 and 184: 2. Effect of debenture conversions
Page 185 and 186: F ive-year consolited statement of
Page 187 and 188: F ive-year consolidated balance she
Page 189 and 190: C onsolidated companies as at Decem
Page 191 and 192: Company Percent Percent F/E control
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Recruitments (1) 2 4 Disabled emplo
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7 Paid leave other than vacations E
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Consumption Peugeot 607 Fuel Displa
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E nvironmental Indicators Productio
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Waste production PEUGEOT CITROËN A
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M anagement and Administration Main
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I nformation about the company’s
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S tatutory Auditors’ Report on th
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➔ Stockholders’ Meetings (Artic
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PEUGEOT S.A. 100% AUTOMOBILES CITRO
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S tockholder Information (Euronext
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F inancial authorizations in effect
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216 PSA PEUGEOT CITROËN - INFORMAT
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R esolutions Eighth resolution Auth
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T he Vice Presidents Committee Thie
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12,000 copies of this report were p
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