annual report - FIAT SpA

32. Information on financial risks
The Group is exposed to the following financial risks connected with its operations:
� credit risk, regarding its normal business relations with customers and dealers, and its financing activities;
� liquidity risk, with particular reference to the availability of funds and access to the credit market and to financial
instruments in general;
� market risk (principally relating to exchange rates, interest rates), since the Group operates at an international
level in different currencies and uses financial instruments which generate interest. The Group is also exposed
to the risk of changes in the price of certain listed shares.
As described in the section Risk management, the Group constantly monitors the financial risks to which it is exposed,
in order to detect those risks in advance and take the necessary actions to mitigate them.
The following section provides qualitative and quantitative disclosures on the effect that these risks may have upon
the Group.
The quantitative data reported in the following do not have any predictive value, in particular the sensitivity analysis on
market risks does not reflect the complexity of the market or the reaction which may result from any changes that are
assumed to take place.
Credit risk
The maximum credit risk to which the Group is theoretically exposed at 31 December 2010 is represented by the
carrying amounts stated for financial assets in the statement of financial position and the nominal value of the
guarantees provided on liabilities or commitments to third parties as discussed in Note 29.
Dealers and final customers are subject to specific assessments of their creditworthiness under a detailed scoring
system; in addition to carrying out this screening process, the Group also obtains financial and non-financial
guarantees for risks arising from credit granted for the sale of cars, commercial vehicles and agricultural and
construction equipment. These guarantees are further strengthened where possible by reserve of title clauses on
financed vehicle sales to the sales network and on vehicles assigned under finance leasing agreements.
Balances which are objectively uncollectible either in part or for the whole amount are written down on a specific basis
if they are individually significant. The amount of the write-down takes into account an estimate of the recoverable
cash flows and the date of receipt, the costs of recovery and the fair value of any guarantees received. Impairment
losses are recognised for receivables which are not written down on a specific basis, determined on the basis of
historical experience and statistical information.
Receivables for financing activities classified as Continuing Operations and amounting to €2,866 million at
31 December 2010 contain balances totalling €5 million, which have been written down on an individual basis. Of the
remainder, balances totalling €42 million are past due by up to one month, while balances totalling €92 million are
past due by more than one month. Receivables for financing activities classified as Discontinued Operations and
amounting to €10,908 million at 31 December 2010 contain balances totalling €63 million which have been written
down on an individual basis. Of the remainder, balances totalling €237 million are past due by up to one month, while
balances totalling €734 million are past due by more than one month. In the case of instalment payments, even if only
one instalment is overdue, the whole amount of the receivable is classified as such. At 31 December 2009 balances of
€60 million had been written down on an individual basis out of Receivables for financing activities of the Fiat Group
totalling €12,695 million. Of the remainder, balances totalling €426 million were past due by up to one month, while
balances totalling €918 million were past due by more than one month.
Trade receivables and Other receivables classified as Continuing Operations and amounting to €3,669 million at
31 December 2010 contain balances totalling €41 million which have been written down on an individual basis. Of the
remainder, balances totalling €164 million are past due by up to one month, while balances totalling €341 million are
past due by more than one month. Trade receivables and Other receivables classified as Discontinued Operations
and amounting to €2,567 million at 31 December 2010 contain balances totalling €49 million which have been written
down on an individual basis. Of the remainder, balances totalling €147 million are past due by up to one month, while
balances totalling €185 million are past due by more than one month. At 31 December 2009 balances totalling €67
million had been written down on an individual basis out of Trade receivables and Other receivables of the Fiat Group
totalling €6,178 million. Of the remainder, balances totalling €280 million were past due by up to one month, while
balances totalling €568 million were past due by more than one month.
The significant decrease in the past due component in receivables from financing activities is partially attributable to
the gradual collection of loans granted by Banco CNH Capital S.A. as part of the development/subsidised loans
programme for agriculture of the Brazilian development agency managed through Banco Nacional de
Desenvolvimento Economico e Social (“BNDES”). These receivables fell under the scope of the general debt relief
Fiat Group Consolidated Financial Statements at 31 December 2010 206