annual report - FIAT SpA

Associates
Associates are enterprises over which the Group has significant influence, but not control or joint control, over the
financial and operating policies, as defined in IAS 28 – Investments in Associates. The consolidated financial
statements include the Group’s share of the earnings of associates using the equity method, from the date that
significant influence commences until the date that significant influence ceases. When the Group’s share of losses of
an associate, if any, exceeds the carrying amount of the associate in the Group’s balance sheet, the carrying amount
is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred
obligations in respect of the associate.
Investments in other companies
Investments in other companies that are available-for-sale financial assets are measured at fair value, when this can
be reliably determined. Gains or losses arising from changes in fair value are recognised directly in other
comprehensive income until the assets are sold or are impaired, when the cumulative gains and losses previously
recognised in equity are recognised in the income statement of the period.
Investments in other companies for which fair value is not available are stated at cost less any impairment losses.
Dividends received from these investments are included in Other income (expenses) from investments.
Transactions eliminated on consolidation
All significant intragroup balances and transactions and any unrealised gains and losses arising from intragroup
transactions are eliminated in preparing the consolidated financial statements. Unrealised gains and losses arising
from transactions with associates and jointly controlled entities are eliminated to the extent of the Group’s interest in
those entities.
Foreign currency transactions
Transactions in foreign currencies are recorded at the foreign exchange rate prevailing at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the
exchange rate prevailing at that date. Exchange differences arising on the settlement of monetary items or on
reporting monetary items at rates different from those at which they were initially recorded during the period or in
previous financial statements, are recognised in the income statement.
Consolidation of foreign entities
All assets and liabilities of foreign consolidated companies with a functional currency other than the Euro are
translated using the exchange rates in effect at the balance sheet date. Income and expenses are translated at the
average exchange rate for the period. Translation differences resulting from the application of this method are
classified as equity until the disposal of the investment. Average rates of exchange are used to translate the cash
flows of foreign subsidiaries in preparing the consolidated statement of cash flows.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are recorded in the relevant functional
currency of the foreign entity and are translated using the period end exchange rate.
The principal exchange rates used in 2010 and 2009 to translate into Euros the financial statements prepared in
currencies other than the Euro were as follows:
Average 2010 At 31 December 2010 Average 2009 At 31 December 2009
U.S. dollar 1.326 1.336 1.395 1.441
Pound sterling 0.858 0.861 0.891 0.888
Swiss franc 1.380 1.250 1.510 1.484
Polish zloty 3.995 3.975 4.328 4.105
Brazilian real 2.331 2.218 2.767 2.511
Argentine peso 5.183 5.303 5.201 5.473
In the context of IFRS First-time Adoption, the cumulative translation difference arising from the consolidation of
foreign operations outside the Euro zone was set at nil, as permitted by IFRS 1; gains or losses on subsequent
disposal of any foreign operation only include accumulated translation differences arising after 1 January 2004.
Business Combinations
Business combinations are accounted for by applying the acquisition method. Under this method, the consideration
transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date
Fiat Group Consolidated Financial Statements at 31 December 2010 113