Accrued Liabilities – The valuation of pension liabilities and
postretirement benefit liabilities is based upon the projected unit
credit method in accordance with SFAS 87, “Employers’
Accounting for Pensions,” and SFAS 106, “Employers’ Accounting
for Postretirement Benefits Other Than Pensions.” An accrued li-
ability for taxes and other contingencies is recorded when an obli-
gation to a third party has been incurred, the payment is probable
and the amount can be reasonably estimated. The effects of ac-
is recorded by the entity or (2) the date at which the sales
incentive is offered. The Issue also requires that when recognized,
the reduction in or refund of the selling price of the product or
service resulting from any cash sales incentive should be
classified as a reduction of revenue. If the sales incentive is a free
product or service delivered at the time of the sale, the cost of the
free product or service should be classified as cost of sales. The
consensus reached in the Issue is effective for DaimlerChrysler in
crued liabilities relating to personnel and social costs are valued at its financial statements beginning April 1, 2001, with earlier
their net present value where appropriate.
adoption encouraged. DaimlerChrysler will apply the consensus
prospectively in 2001. DaimlerChrysler is currently determining
the impact of the adoption of Issue 00-14 on the Group’s
consolidated financial statements.
Use of Estimates – Preparation of the financial statements requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
3. SCOPE OF CONSOLIDATION
Scope of Consolidation - DaimlerChrysler comprises 485 foreign
and domestic subsidiaries (1999: 549) and 1 joint venture (1999:
16); the latter is accounted for on a pro rata basis. A total of 108
(1999: 55) subsidiaries are accounted for in the consolidated
financial statements using the equity method of accounting.
New Accounting Pronouncements – In September 2000, the FASB
issued SFAS 140, “Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities – a
replacement of FASB Statement No. 125.” This statement revises
the standards for accounting for securitizations and other transfers During 2000, 45 subsidiaries and 1 joint venture were included in
of financial assets and collateral and requires certain financial
statement disclosures. SFAS 140 is effective for transactions
occurring after March 31, 2001. The new disclosure requirements
are effective for fiscal years ending after December 15, 2000.
Adoption of this replacement standard is not anticipated to have a
material effect on DaimlerChrysler’s consolidated financial
statements (see Note 32).
the consolidated financial statements for the first time. A total of
113 subsidiaries and 16 joint ventures were no longer included in
the consolidated group. Significant effects of changes in the
consolidated group on the consolidated balance sheets and the
consolidated statements of income are explained further in the
notes to the consolidated financial statements. A total of 255
subsidiaries (“affiliated companies”) are not consolidated as their
combined influence on the financial position, results of operations,
and cash flows of the Group is not material (1999: 343). The effect
of such non-consolidated subsidiaries for all years presented on
consolidated assets, revenues and net income of DaimlerChrysler
was approximately 1%. In addition, 6 (1999: 7) companies
administering pension funds whose assets are subject to
restrictions have not been included in the consolidated financial
statements. The consolidated financial statements include 74
associated companies (1999: 109) accounted for at cost and
recorded under investments in related companies as these
companies are not material to the respective presentation of the
financial position, results of operations or cash flows of the Group.
As of July 1, 2000, DaimlerChrysler adopted Emerging Issues Task
Force Issue No. 99-20 (“EITF 99-20”), “Recognition of Interest
Income and Impairment on Purchased and Retained Beneficial
Interests in Securitized Financial Assets.” EITF 99-20 specifies,
among other things, how a transferor that retains an interest in a
securitization transaction, or an enterprise that purchases a
beneficial interest, should account for interest income and
impairment (see Note 10).
In July 2000, the Emerging Issues Task Force reached a final
consensus on Issue 00-10, “Accounting for Shipping and Handling
Fees and Costs.” The Issue requires that all amounts billed to the
customer in a sale transaction related to shipping and handling, if
any, represent revenues earned for the goods provided and should
be classified as revenue. DaimlerChrysler adopted the consensus
effective October 1, 2000. Adoption of Issue 00-10 did not have a
material impact on the Group’s consolidated financial statements.
With the adoption of EITF 00-10, DaimlerChrysler has elected to
reclassify shipping and handling costs from selling expenses to
cost of sales for all years presented. DaimlerChrysler classifies
amounts billed to a customer in a sale transaction related to
shipping and handling as revenue.
Investment in Adtranz – In the first quarter of 1999,
DaimlerChrysler acquired the remaining outstanding shares of
Adtranz, a rail systems joint venture, from Asea Brown Boveri for
$472 (€441). The acquisition was accounted for under the
purchase method of accounting. The purchase price was allocated
to assets acquired and liabilities assumed based on their estimated
fair values. This allocation resulted in goodwill of €100, which is
being amortized on a straight-line basis over 17 years. Prior to the
acquisition in 1999, the Group accounted for its investment in
Adtranz, including its 65 subsidiaries, using the proportionate
method of consolidation. Accordingly, the consolidated financial
statements of DaimlerChrysler for the year ended December 31,
1998 included DaimlerChrysler’s 50% interest in the assets and
liabilities, revenues and expenses and cash flows of Adtranz.
During 2000, the Emerging Issues Task Force reached a final con-
sensus on Issue 00-14, “Accounting for Certain Sales
Incentives.” The Issue requires that an entity recognizes sales
incentives at the latter of (1) the date at which the related revenue
(
in millions of €, except per share amounts)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 81
