Volvo 2001 Annual Report Download - page 61

57
Notes to consolidated financial statements
Amounts in SEK M unless otherwise specified. The amounts within parentheses refer to the two preceding years; the
first figure is for 2000 and the second for 1999.
with the corresponding accounting standard issued by
the International Accounting Standards Committee (IASC).
In applying the transition rules as a consequence of
the aforementioned accounting standards, there are no
retroactive effects on Volvo’s earlier financial statements.
In applying the new standards during fiscal year 2001,
RR1:00 Consolidated Financial Statements and
Business Combinations, RR14 Joint Ventures, RR15
Intangible Assets, RR16 Provisions, Contingent
Liabilities and Contingent Assets result in a change in
Volvo’s accounting principles.
RR1:00 Consolidated Financial Statements and
Business Combinations
In accordance with RR1:00 Consolidated Financial
Statements and Business combinations, when a sub-
sidiary is acquired through the issue of own shares, the
purchase consideration is determined to the market
price of the issued shares at the time of the transaction.
In accordance with Volvo’s previous accounting princi-
ples, such a purchase consideration was determined
based on the average market price of the issued shares
during ten days prior to the public disclosure of the
transaction.
RR14 Joint Ventures
In accordance with RR14 Joint ventures, a joint venture
should either be reported by use of the proportinate
consolidation method or the equity method. Effective in
2001, the proportinate consolidation method is the
preferred method under Volvo's accounting principles.
In previous years, all joint ventures have been reported
by use of the equity method.
RR15 Intangible Assets
In accordance with RR15 Intangible Assets, the expendi-
tures for development of new products, production and
information systems shall be reported as intangible
assets if such expenditures with a high degree of cer-
tainty will result in future financial benefits for the com-
pany. The acquisition value for such intangible assets
shall be amortized over the estimated useful life of the
assets. Volvo’s application of the new rules means that
very high demands are established in order for these
development expenditures to be reported as assets. For
example, it must be possible to prove the technical func-
tionality of a new product prior to this development being
reported as an asset. In normal cases, this means that
expenditures are capitalized only during the industrializa-
tion phase of a product development project. In accord-
ance with Volvo’s previous accounting principles, all
costs for the development of new products, production
and information systems were expensed on a current
basis.
Volvo’s operations
Since the divestment of Volvo Cars at the beginning of
1999, the Volvo Group’s operations are focused on
transport solutions for commercial use. The operations
include development, manufacturing and sales of vehi-
cles, machinery and power systems and also transport-
related services such as service adapted to customer
requirements, financing, insurance and transport infor-
mation systems. Volvo is, after the acquisition of Renault
V.I. and Mack Trucks at the beginning of 2001, the
world’s second largest manufacturer of heavy trucks and
also one of the world’s largest producers of heavy diesel
engines. Volvo is also one of the world’s largest manu-
facturers of buses and construction equipment, a succ-
essful supplier of marine and industrial power systems,
and a key partner to the foremost companies in the air-
craft and aerospace industries.
Operating structure
The Volvo Group’s operations during 2001 were organ-
ized in six business areas: Global Trucks, Buses,
Construction Equipment, Volvo Penta, Volvo Aero and
Financial Services. In addition to the six business areas,
there are certain operations, consisting mainly of busi-
ness units, that are designed to support the business
areas’ operations.
Each business area except Financial Services has
total responsibility for its operating income and operating
capital. The Financial Services business area has
responsibility for its net income and total balance sheet
within certain restrictions and principles that are estab-
lished centrally.
The supervision and coordination of treasury and tax
matters is organized centrally to obtain the benefits of a
Groupwide approach.
The legal structure of the Volvo Group is based on
optimal handling of treasury, tax and administrative mat-
ters and, accordingly, differs from the operating structure.
The consolidated financial statements for AB Volvo
(the Parent Company) and its subsidiaries are prepared
in accordance with Swedish GAAP. These accounting
principles differ in significant respects from U.S. GAAP,
see Note 33.
Changes in accounting principles
As of 2001, Volvo is applying the following new account-
ing standards issued by the Swedish Financial Account-
ing Standards Council: RR1:00 Consolidated Financial
Statements and Business Combinations, RR12 Tangible
Assets, RR13 Associates, RR14 Joint Ventures, RR15
Intangible Assets, RR16 Provisions, Contingent Liabili-
ties and Contingent Assets, RR17 Impairment of Assets,
RR18 Income Per Share, RR19, Discontinuing Oper-
ations and RR20 Interim Financial Reporting. All
accounting standards comply in all significant respects
Note 1Accounting principles