Volvo 2005 Annual Report Download - page 109

Volvo Group 2005 105
Depreciation and
amortization by type of asset 2004 2005
Intangible assets 1,396 1,409
Property, plant and equipment 4,182 4,370
Assets under operating leases 4,425 4,115
Total 10,003 9,894
Capital expenditures
by type of asset 2004 2005
Intangible assets 2,287 3,473
Property, plant and equipment 5,790 6,829
Assets under operating leases 4,406 4,549
Total 12,483 14,851
Capital expenditures for property, plant and equipment approved but not yet implemented at December 31, 2005, amounted to SEK 7.8 billion
(8.2).
Goodwill
Annually, in connection with the annual closing, or more frequently
if required, Volvo’s operations are evaluated and compared with its
carrying value in order to identify any impairment of goodwill assets.
Volvo’s evaluation model is based on a discounted cash-fl ow model.
Evaluation is made on cash-generating units with reciprocal syner-
gies, identifi ed as Volvo’s operational areas or business areas. Good-
will assets are allocated to these operational areas on the basis of
anticipated future utility. The evaluation is based on management’s
best judgment of the operations’ development. The basis for this
judgment is long-term forecasts of the market’s growth in relation
to the development of Volvo’s operations. In the model, Volvo is
expected to maintain stable capital effi ciency over time. The evalua-
tion is made on nominal value and the general rate of infl ation, in line
with the European target, is used. Volvo uses a discounting factor
calculated to 12% before tax for 2005.
During 2005, the value of Volvo’s operations has exceeded the
carrying value of goodwill for all operational areas, and accordingly,
no impairment was recognized. For the specifi ed cash generating
units Volvo has evaluated the value of goodwill with reasonable
changed assumptions, negatively adjusted with one percentage
point, where of no adjustment, each by each, would have such a big
effect that there would be an impairment.
Goodwill per Business Area 2005
Volvo Trucks 4,096
Renault Trucks 2,007
Mack Trucks 982
Buses 1,134
Construction Equipment 2,480
Other 373
Total goodwill value 11,072
Investment property
Investment property is property owned for the purpose of obtaining
rental income and/or appreciation in value. The acquisition cost of
investment property was 1,534 (1.859) at year-end. Capital expendi-
tures during 2005 amounted to 15 (20). Accumulated depreciation
was 463 (472) at year-end, whereof 53 (68) during 2005. The esti-
mated fair value of investment property was SEK 1.9 billion (2,2) at
year-end, based on the yield. The required return is based on current
property market conditions for comparable properties in comparable
locations. All investment properties were leased out during the year.
Net income for the year was affected by 272 (332) in rental income
from investment properties and 45 (66) in direct costs.
Note 15 Shares and participations
The market values of Volvo’s holdings of shares and participations in
listed companies as of December 31, 2005 are shown in the table
below. As from 2005 shares in listed companies would be revaluated
to current market value. The revaluation is booked to Equity and
amounts to 83 (–).
Carrying value Market value
Deutz AG 253 253
Total holdings
in listed companies 253 253
Holdings in non-listed companies
1 303 –
Total shares and participations
in other companies 556 –
1 reported at cost
Peach County Holdings Inc
In 2004, as a part of the restructuring of Henlys Group Plc, see
note 11, the convertible debenture loan issued to Henlys was partly
converted into shares in Peach County Holdings (owner of school
bus manufacturer Blue Bird). Volvo’s holding in Peach County Hold-
ings Inc is 42,5%. During the fourth quarter of 2005 Volvo wrote
down its shareholding in Peach County Holdings, Inc. by about
SEK 550 M. At December 31, 2005 Volvo held 42.5% of the US-
based company, which in turn owns the American school bus manu-
facturer Blue Bird. Since its reconstruction in the preceding year,
Blue Bird has not developed well. The write-down was made as a
consequence of Volvo’s decision not to participate in continued
fi nancing efforts. After the write-down, the value is zero. In January
2006, Peach County Holdings entered into reconstruction proceed-
ings (Chapter 11) and as a consequence of Volvo choosing not to
participate in the continued reconstruction, Volvo’s shares in the
company were cancelled.
Småföretagarinvest AB (previously Arbustum Invest AB)
In 2005, Volvo’s holding in Småföretagarinvest AB decreased to
17% and the company is no longer considered as an associated
company.