Volvo 1999 Annual Report Download - page 83

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Post-retirement expenses in accordance with U.S. GAAP include:
Defined benefit plans in Sweden and U.S. 1997 1998 1999
Service cost 260 289 242
Interest cost 408 415 279
Expected return on plan assets (376) (513) (817)
Amortization, net 252 33 466
Pension costs for defined benefit plans 544 224 170
Other plans (mainly defined contribution plans) 3,051 3,030 1,332
Total pension costs in accordance with U.S. GAAP 3,595 3,254 1,502
Total pension costs in accordance with
Swedish accounting principles 3,660 3,567 1,542
Adjustment of net income for the year in accordance with
U.S. GAAP before tax effect 65 313 40
January 1, 1999 December 31, 1999
Book value Market value Book value Market value
Available for sale
Marketable securities 2,593 2,654 7,826 7,828
Shares and convertible debenture loan 1,110 851 5,583 4,741
Trading 3,350 3,681 12,674 13,258
The book values and market values for these listed securities are distributed as follows:
H. Items affecting comparability. In the Volvo Group’s
year-end accounts, costs for restructuring measures are
reported in the year that implementation of these mea-
sures was decided by each company’s Board of Directors.
In accordance with U.S. GAAP, costs are reported for
restructuring measures only under the condition that
a sufficiently detailed plan for implementation of the
measures is prepared at the end of the accounting period.
In accordance with U.S. GAAP, the gain on the sale of
Volvo Cars was lower than in accordance with Swedish
GAAP. This is mainly attributable to the accounting differ-
ences described under points A, E, H and I resulting in
a higher net asset value for the operations divested.
I. Provision for pensions and other postemployment
benefits. The greater part of the Volvo Group’s pension
commitments are defined contribution plans in which
regular payments are made to independent authorities or
bodies that administer pension plans. There is no differ-
ence between U.S. and Swedish accounting principles in
accounting for these pension plans.
Other pension commitments are defined benefit plans;
that is, the employee is entitled to receive a certain level of
pension benefits, usually related to the employee’s final
salary. In these cases the annual pension cost is calculated
based on the current value of future pension payments. In
Volvo’s consolidated accounts, provisions for pensions and
pension costs for the year in the individual companies are
calculated based on local rules and directives. In accord-
ance with U.S. GAAP, provisions for pensions and pension
costs for the year should always be calculated as specified
in SFAS 87, “Employers Accounting for Pensions”. The
difference lies primarily in the choice of discount rates and
the fact that U.S. calculations of pension benefit obliga-
tions, in contrast to Swedish calculations, are based on
salaries calculated at the time of retirement. In addition
under U.S. GAAP, the value of pension assets in excess of
the pension obligation is accounted for.
E. Interest expense. In accordance with U.S. GAAP,
interest expense incurred in connection with the financ-
ing of the construction of property and other qualifying
assets is capitalized and amortized over the economic
life of the related assets. In Volvo’s consolidated
accounts, interest expenses are reported in the year
in which the arise.
F. Leasing. Certain leasing transactions are reported
differently in accordance with Volvo’s accounting principles
compared with U.S. GAAP. The differences pertain to
sale-leaseback transactions prior to 1997.
G. Investments in debt and equity securities. In accord-
ance with U.S. GAAP, Volvo applies SFAS 115: “Account-
ing for Certain Investments in Debt and Equity Securi-
ties.” 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 “available-for-
sale” securities, reported at fair value, with unrealized
gains or losses included in shareholders’ equity.
As of December 31, 1999, unrealized losses after
deducting for unrealized gains in “available-for-sale”
securities amounted to 840 (198; 3,747). Sale of “avail-
able-for-sale” shares in 1999 provided SEK – billion
(6.6; 6,4) and the capital gain, before tax, on sales of
these shares amounted to approximately SEK – billion
(4.5; 1,0).