Volvo 2004 Annual Report Download - page 61

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AB Volvo’s holding of shares in subsidiaries as of December 31,
2004 is shown on pages 103–105. Significant acquisitions, forma-
tions and divestments within the Group are listed below.
L.B. Smith (SABA Holding Inc.)
On May 2, 2003 Volvo Construction Equipment purchased the
assets amounting to USD 189 M associated with the Volvo distribu-
tion business of L.B. Smith Inc. in the US. No goodwill or real estate
was included in the deal. Because the intention was to spin off the
acquired operations, the L.B. Smith distribution business was not
consolidated in the Volvo Group’s financial statements during 2003.
The major part of the dealerships was divested during 2004. The
remaining part of the operation has been consolidated in the Volvo
Group’s financial statements during 2004.
Renault V.I. and Mack
During the fourth quarter 2004 AB Volvo and Renault signed a
settlement agreement regarding the disagreement the companies
have had since 2001 pertaining to Volvo’s acquisition of Renault
V.I./Mack and the value of certain of the acquired assets and certain
warranty claims. The settlement, EUR 108 M has reduced the
goodwill amount pertaining to the acquisition of Renault V.I.
Prévost Car Inc.
During the third quarter 2004 the North american bus manufacturer
Prévost Car Inc became a wholly owned subsidiary of Volvo Bus
Corporation. As part of the restructuring of the bus manufacturer
Henlys Group plc, Volvo Group reached an agreement to acquire the
remaining 50% of the shares. Prévost Car Inc. was a former 50/50
joint venture between Volvo and Henlys, reported in the Volvo Group
accounts in accordance with the proportionate consolidation method.
The purchase price was USD 83 M including two loans made avail-
Note 2Acquisitions and divestments of shares in subsidiaries
able to Prévost Car Inc. by Henlys. Prévost Car Inc. contain the
Prévost and Nova brands. Prévost manufactures coaches and bus
shells for luxury mobile homes. Nova Bus manufactures city buses
mainly for the Canadian market.
Axle manufacturing
During the third quarter 2004 Volvo and ArvinMeritor signed a
Strategic Alliance Agreement for the supply of axels. As a conse-
quence of the strategic alliance ArvinMeritor acquired the Volvo’s
axle plant and foundry in Lyon, France.
Bilia’s truck and construction equipment business
(“Kommersiella Fordon Europa AB”)
In the third quarter 2003, the acquisition of the truck and construc-
tion equipments operations of Bilia was completed. Volvo exchanged
41% of the shares in Bilia AB for 98% of the shares in Kommer-
siella Fordon Europa AB. Volvo has required compulsory acquisition
of the remaining shares. The acquired operations include dealers and
service suppliers for trucks and construction equipment in the Nordic
region and ten other european countries. The acquisition cost of the
shares was determined to SEK 0.9 billion. The goodwill arising from
this transaction amounted to SEK 0.6 billion.
Volvo Baumaschinen Deutschland GmbH
In February 2003 Volvo Construction Equipment sold the German
dealer Volvo Baumashinen Deutschland GmbH to the Swedish dealer
partner Swecon Anläggningsmaskiner AB.
Volvo Aero Services LP
During 2002 VNA Holding Inc acquired an additional 9% of the
shares in Volvo Aero Services LP (previously The AGES Group ALP).
Thereafter, Volvo owns 95% of Volvo Aero Services LP.
expected future price development, expected inventory turnover period
and expected variable and fixed selling expenses. If the residual value
risks are pertaining to products that are reported as tangible assets
in Volvo’s balance sheet, these risks are reflected by depreciation or
write-down of the carrying value of these assets. If the residual value
risks are pertaining to products which are not reported as assets in
Volvo’s balance sheet, these risks are reflected under the line item
provisions.
Deferred taxes, allocations and untaxed reserves
Tax legislation in Sweden and other countries sometimes contains
rules other than those identified with generally accepted accounting
principles, and which pertain to the timing of taxation and measure-
ment of certain commercial transactions. Deferred taxes are provided
for on differences which arise between the taxable value and report-
ed value of assets and liabilities (temporary differences) as well as on
tax-loss carryforwards. However, with regards to the valuation of
deferred tax assets, these items are recognized provided that it is
probable that the amounts can be utilized against future taxable
income.
Tax laws in Sweden and certain other countries allow companies
to defer payment of taxes through allocations to untaxed reserves.
These items are treated as temporary differences in the consolidated
balance sheet, that is, a split is made between deferred tax liability
and equity capital (restricted reserves). In the consolidated income
statement an allocation to, or withdrawal from, untaxed reserves is
divided between deferred taxes and net income for the year.