Volvo 1997 Annual Report Download - page 59

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the date of acquisition. In accordance with U.S. GAAP, the excess
value of SEK 2.8 billion should be amortized over the economic life
(20 years).
E. Shares and participations. In calculating Volvo’s share of earnings
and shareholders’ equity in associated companies in accordance with
U.S. GAAP, account has been taken of the differences between the
accounting of these companies – in accordance with Volvo’s princi-
ples – and U.S. GAAP. The differences relate mainly to accounting for
and amortization of excess values, accounting for utilized tax-loss
carryforwards and, prior to 1993, accounting for tooling costs.
Income from investments in associated companies is reported
before tax in accordance with Swedish accounting principles, and
after tax in accordance with U.S. GAAP. Taxes attributable to
associated companies amounted to 103 (68; 672).
F. Interest expense. In accordance with U.S. GAAP, interest expense
incurred in connection with the financing of the construction of pro-
perty and other qualifying assets are capitalized and amortized over
the economic life of the pertinent assets.
G. Leasing. Certain leasing transactions are reported differently in
accordance with Volvo’s principles, compared with U.S. GAAP. The
differences pertain to sale-leaseback transactions prior to 1997.
H. Debt and equity securities. In accounting in accordance with U.S.
GAAP, Volvo applies SFAS 115: Accounting for Certain Investments
in Debt and Equity Securities. SFAS 115 addresses the accounting
and reporting for investments in equity securities that have readily
determinable fair market values, and for all debt securities. These
investments are to be classified as either “held-to-maturity” securities
that are reported at cost, “trading” securities that are reported at fair
value with unrealized gains or losses included in earnings, or “availa-
ble-for-sale” securities, reported at fair value, with unrealized gains or
losses included in shareholders’ equity.
As of December 31, 1997, unrealized gains after deducting for
unrealized losses in “available-for-sale” securities amounted to 3,747
(1,661; 10,233). The change between 1996 and 1997 pertains
mainly to divestment of the shareholding in Renault. Sale of “availa-
ble-for-sale” securities in 1997 provided approximately SEK 6.4 billi-
on (13.6: 1.9) and the capital gain, before tax, on sales of these
securities amounted to approximately SEK 1.0 billion (8.3: 1.2) in
1997.
The book value and market value of these listed securities were
distributed as follows.
January 1, 1997 December 31, 1997
Book Market Book Market
Available for sale
Short-term
investments 12,751 13,141 2,508 2,565
Shares 8,646 9,917 2,089 5,779
Trading 8,217 8,309 8,369 8,584
I. Other. Includes adjustments pertaining to pension costs.
Supplem entary U.S. GAAP inform ation
Classification. In accordance with SFAS 95, “cash and cash equi-
valents” comprise only funds with a maturity of three months or less.
Some of Volvo’s liquid funds (see Notes 19 and 20) do not meet this
requirement. Consequently, in accordance with SFAS 95, changes in
this portion of liquid funds should be reported as investment activities.
Cash flow analysis. Actual interest and taxes paid during 1997
amounted to 3,943 (3,944; 3,509) and 1,454 (2,569; 3,571).
Provision for postemploym ent benefits
Provisions for pension and pension expenses are calculated by the
different companies within the Group according to local rules and
regulation. According to U.S. GAAP, provisions for pension and pen-
sion expenses are calculated in accordance with SFAS87: Employees’
Accounting for Pensions. Certain employees are covered by defined
pension benefit plans (ITP pension plans) of a noncontributory nature.
Most of the plans are administered by Governmental or quasi-govern-
mental organizations, and the Company cannot influence the actuarial
assumptions and methods used. Actuarial information supplied by the
administrative agency in Sweden, indicates that the accrued pension
costs approximate the actuarially computed value of statutory and
voluntary benefit plans. In other countries where actuarial information
is available, the net assets available for benefits may exceed the
actuarially computed value of statutory and voluntary benefits.
Sum m ary of securities available Book Market FAS15 adjustment Tax and FAS 15 adjustment
for selling and trading value value gross minority interests net
Trading, December 31, 1997 8,369 8,584 215 1(60) 155
Trading, January 1, 1997 8,217 8,309 92 (26) 66
Change 1997 123 2(34) 89
Available for sale
Short-term investments 2,508 2,565 57 (16) 41
Shareholdings 2,089 5,779 3,690 (1,033) 2,657
Available for sale
December 31, 1997 4,597 8,344 3,747 1(1,049) 2,698
January 1, 1997 21,397 23,058 1,661 (465) 1,196
Change 1997 2,086 (584) 1,502
1 Adjustment of shareholders’ equity in accordance with U.S. GAAP before tax effects.
2 Adjustment of net income in accordance with U.S. GAAP before tax effects.