annual report - FIAT SpA

Format of the financial statements
The Group presents an income statement using a classification based on the function of expenses (otherwise known
as the “cost of sales” method), rather than based on their nature, as this is believed to provide information that is more
relevant. The format selected is that used for managing the business and for management reporting purposes and is
consistent with international practice in the automotive sector. In this income statement, in which the classification of
expenses is based on their function, the Trading profit/(loss) is reported specifically as part of Operating profit/(loss)
and separate from the income and expense resulting from the non-recurring operations of the business, such as
Gains (losses) on the sale of investments, Restructuring costs and any Other income (expenses) defined as unusual
and of a similar nature to these items. By doing this, it is believed that the Group’s actual performance from normal
trading operations may be measured in a better way, while disclosing specific details of unusual income and
expenses. Consequently, the definition of unusual transaction adopted by the Group differs from that provided in the
Consob Communication of 27 July, 2006, under which unusual and abnormal transactions are those which, because
of their significance or importance, the nature of the parties involved, the object of the transaction or the methods of
determining the transfer price or the timing of the event (close to the year end), may give rise to doubts regarding the
accuracy/completeness of the information in the financial statements, conflicts of interest, the safeguarding of an
entity’s assets or the protection of non-controlling interests.
For the Statement of financial position, a mixed format has been selected to present current and non-current assets
and liabilities, as permitted by IAS 1. In more detail, both companies carrying out industrial activities and those
carrying out financial activities are consolidated in the Group’s financial statements. The investment portfolios of
financial services companies are included in current assets, as the investments will be realised in their normal
operating cycle. Financial services companies, though, obtain funds only partially from the market: the remaining are
obtained from Fiat S.p.A. through the Group’s treasury companies (included in industrial companies), which lend
funds both to industrial Group companies and to financial services companies as the need arises. This financial
service structure within the Group means that any attempt to separate current and non-current debt in the
consolidated Statement of financial position cannot be meaningful. Suitable disclosure of the due dates of liabilities is
moreover provided in the notes.
The Statement of Cash Flows is presented using the indirect method.
In connection with the requirements of the Consob Resolution No. 15519 of 27 July 2006 as to the format of the
financial statements, specific supplementary Income Statement, Statement of Financial Position and Statement of
Cash Flows formats have been added for related party transactions so as not to compromise an overall reading of the
statements.
Basis of consolidation
Subsidiaries
Subsidiaries are enterprises controlled by the Group, as defined in IAS 27 – Consolidated and Separate Financial
Statements. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating
policies of an enterprise so as to obtain benefits from its activities. The financial statements of subsidiaries are
combined in the consolidated financial statements from the date that control commences until the date that control
ceases. Non-controlling interests in the net assets of consolidated subsidiaries and non-controlling interests in the
profit or loss of consolidated subsidiaries are presented separately from the interests of the owners of the parent in the
consolidated statement of financial position and income statement respectively. Losses applicable to non-controlling
interests which exceed the minority’s interests in the subsidiary’s equity are allocated against the non-controlling
interests. Changes in the interests in a subsidiary which do not lead to the acquisition or loss of control are recognised
directly in equity.
Subsidiaries that are either dormant or generate a negligible volume of business, are not consolidated. Their impact
on the Group’s assets, liabilities, financial position and profit/(loss) attributable to the owners of the parent is
immaterial.
Jointly controlled entities
Jointly controlled entities are enterprises over whose activities the Group has joint control, as defined in IAS 31 –
Interests in Joint Ventures. The consolidated financial statements include the Group’s share of the earnings of jointly
controlled entities using the equity method from the date that joint control commences until the date that joint control
ceases.
Fiat Group Consolidated Financial Statements at 31 December 2010 112