Basis of preparation

The 2013 consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (the “IFRS”) issued by the International Accounting Standards Board (“IASB”) and adopted by the European Union, and with the provisions implementing article 9 of Legislative Decree 38/2005. The designation “IFRS” also includes all valid International Accounting Standards (“IAS”), as well as all interpretations of the IFRS Interpretations Committee, formerly the Standing Interpretations Committee (“SIC”) and then the International Financial Reporting Interpretations Committee (“IFRIC”).

The financial statements are prepared under the historical cost method, modified as required for the measurement of certain financial instruments, as well as on a going concern basis. In this respect, the Group’s assessment is that no material uncertainties (as defined in paragraph 25 of IAS 1) exist about its ability to continue as a going concern, also considering the on going operational integration between Fiat and Chrysler and the Group’s industrial and financial flexibility.

The Group’s presentation currency is Euro.

Format of the financial statements

For presentation of the Income statement, the Group uses a classification based on the function of expenses, rather than one based on their nature, as it is more representative of the format used for internal reporting and management purposes and is consistent with international practice in the automotive sector.

The Group measures its performance on the basis of Trading profit and Earnings before Interest and Taxes (EBIT). EBIT is the measure of the Group profitability before interests and taxes; it includes all revenues and costs, income and expenses arising from the Group ongoing operations, whether recurring or non-recurring. Trading profit reflects the result from ongoing operations before Result from investments and unusual items that are separately reported in accordance with IAS 1 paragraph 85 which are:

  • Gains/(losses) on the disposal of investments in subsidiaries, jointly controlled entities and associates;
  • Restructuring costs;
  • Impairment of Property plant and equipment and Intangible assets arising from transactions that are only incidentally related to the ordinary activities of the Group and are not expected to occur frequently (i.e. impairment or other losses as a consequence of change in strategy related to products portfolio, manufacturing footprint, dealer network and suppliers);
  • Other items only incidentally related to the ordinary activities of the Group and not expected to occur frequently, such as the effect of defined benefit plan amendments, including curtailments and settlements, and acquisition costs related to a business combination or costs arising from operations terminated or disposed of in prior years.

The definition of “unusual” adopted by the Group differs from the definition provided in the Consob Communication of 28 July 2006, under which unusual and/or abnormal transactions are those which – because of their significance or materiality, the nature of the counterparty, the object of the transaction, the method for determination of the transfer price or the timing of the event (e.g., close to year-end) – could give rise to doubts regarding the accuracy/completeness of the information in the financial statements, conflicts of interest, the proper safeguarding of corporate assets or protection of non-controlling interests.

For the Consolidated statement of financial position, a mixed format has been selected to present current and non-current assets and liabilities, as permitted by IAS 1. More specifically, the Group’s financial statements include both industrial companies and financial services companies. The investment portfolios of financial services companies are included in current assets, as the investments will be realized in their normal operating cycle. However, the financial services companies only obtain a portion of their funding from the market; the remainder is obtained from Fiat S.p.A. through the Group’s treasury companies (included under industrial activities), which provide funding both to industrial companies and financial services companies in the Group, as the need arises. This financial service structure within the Group does not allow the separation of financial liabilities funding the financial services operations (whose assets are reported within current assets) and those funding the industrial operations. Presentation of financial liabilities as current or non-current based on their date of maturity would not facilitate comparison with financial assets, which are categorized on the basis of their normal operating cycle. Disclosure as to the due date of liabilities is provided in Note 27.

The Statement of cash flows is presented using the indirect method.

In connection with the requirements of Consob Resolution No. 15519 of 27 July 2006 relating 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.