annual report - FIAT SpA

subsequent cash flows into perpetuity. The terminal value growth rate selected in 2010 and 2009 for the Agricultural
equipment cash-generating unit was 1% and that selected for the Construction equipment cash generating unit
was 2%.
The total asset market multiples were utilised in determining the fair value of the Financial Services reporting unit
under the market approach. CNH used the market approach as the primary approach to measure the fair value of the
Financial Services reporting unit as it derives value based primarily on the assets under management. The market
approach measures fair value based on prices and other relevant information generated by market transactions
involving identical or comparable assets or liabilities. Under this approach, CNH makes use of market price data of
corporations whose stock is actively traded in a public, free and open market, either on an exchange or over-the
counter basis. Although it is clear that no two companies are entirely alike, the corporations selected as guideline
companies must be engaged in the same or similar line of business or be subject to similar financial and business
risks, including the opportunity for growth.
Revenue and EBITDA market multiples were utilised in determining the fair value of the Equipment Operations cash
generating units as a secondary approach to further supporting the discounted cash flow approach. Because the
market approach does not evaluate the CNH cash generating units’ projected cash flows, sector management
believes the market approach enables verification of the implied multiples derived from the discounted cash flows
approach using market benchmarks. CNH management identified comparable companies by reviewing all publicly
traded companies operating in the CNH lines of business. The comparable companies used were determined based
on an evaluation of all relevant factors, including whether the companies were subject to similar financial and business
risks.
The fair values of each of the three cash-generating units calculated using the above methods in any case exceeded
their carrying amounts and their values determined using the discounted cash flow method at 31 December 2010.
The results obtained for the Trucks and Commercial Vehicles sector and related sensitivity analyses also confirmed
the absence of significant impairment losses.
Finally, the estimates and budget data to which the above mentioned parameters have been applied are those
determined by management based on past performance and expectations of developments in the markets in which
the Group operates. Estimating the recoverable amount of cash generating units requires discretion and the use of
estimates by management. The Group cannot guarantee that there will be no goodwill impairment in future periods.
Circumstances and events, which could potentially cause further impairment losses, are constantly monitored by the
Fiat Industrial Group.
Development costs
The amortisation of development costs and impairment losses are reported in the income statement as Research and
development costs.
Development costs recognised as assets are attributed to cash generating units and are tested for impairment
together with the related tangible fixed assets, using the discounted cash flow method for determining their
recoverable amount.
Fiat Group Consolidated Financial Statements at 31 December 2010 151