Volvo 2005 Annual Report Download - page 129

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Volvo Group 2005 125
Signifi cant differences between IFRS and US GAAP for Volvo
A. Derivative instruments and hedging activities. Volvo uses forward
exchange contracts and currency options to hedge the value of
future commercial fl ows of payments in foreign currency and com-
modity purchases. As of 2005, Volvo applies IAS 39, Financial
Instruments: Recognition and Measurement. The 2004 numbers
have not been restated according to IAS 39. The accounting for
derivative instruments and hedging activities under IFRS corre-
sponds in substance with US GAAP.
Volvo applied hedge accounting under US GAAP for certain com-
mercial cash fl ow hedges for hedging of interest risk until 2003.
At January 1, 2004 this hedge accounting was ended. The basis
adjustment on previously hedged items booked in Other Compre-
hensive Income will be amortized over the remaining time to maturity
for the contracts.
At January 1, 2005, Volvo ceased to apply hedge accounting for
hedging of interest rate risks in fair value hedges. The basis adjust-
ment on previously hedged items will be amortized over the remain-
ing time to maturity for the contracts. The difference in net income
and equity for the terminated hedges is assignable to different
adjustment amounts for the hegdes items and different periods of
transition.
Note 37 Net income and shareholders’ equity in accordance with US GAAP
A summary of the Volvo Group’s net income and shareholders’ equity
determined in accordance with US GAAP, is presented in the
accompanying tables.
In conjunction with the transition to IFRS, certain adjustment
entries have changed as a result of Volvo’s own accounting having
changed and become, in many instances, closer to US GAAP, see
note 3 Impact from IFRS.
Application of US GAAP would have the following effect on con-
solidated net income and shareholders’ equity:
Net income 2004 2005
Income for the period in accordance with IFRS 9,907 13,106
Items increasing (decreasing) reported net income
Derivative instruments and hedging activities (A) 228 9
Business combinations (B) – –
Investments in debt and equity securities (C) 5,157 –
Restructuring costs (D) 311 (153)
Post-employment benefi ts (E) (286) (307)
Product development (F) (565) (1,601)
Entrance fees, aircraft engine programs (G) (392) (156)
Other (H) (60) 98
Income taxes on above US GAAP adjustments (I) 156 438
Net increase (decrease) in net income 4,549 (1,672)
Minority interest (J) (40) (38)
Net income (loss) in accordance with US GAAP 14,416 11,396
Net income (loss) per share, SEK in accordance with US GAAP 34.44 28.12
Weighted average number of shares outstanding (in thousands) 418,529 405,242
Shareholders’ equity 2004 2005
Shareholders’ equity in accordance with IFRS 70,155 78,768
Items increasing (decreasing) reported shareholders’ equity
Derivative instruments and hedging activities (A) 1,300 140
Business combinations (B) 5,932 5,932
Investments in debt and equity securities (C) (494) –
Restructuring costs (D) 311 158
Post-employment benefi ts (E) 1,326 990
Product development (F) (4,708) (6,450)
Entrance fees, aircraft engine programs (G) (1,320) (1,482)
Other (H) (56) 70
Income taxes on above US GAAP adjustments (I) 862 1,620
Net increase (decrease) in shareholders’ equity 3,153 978
Minority interest (J) (229) (260)
Shareholders’ equity in accordance with US GAAP 73,079 79,486