Volvo 2007 Annual Report Download - page 108
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104 Financial information 2007
Notes to consolidated fi nancial statements
Depreciation and
amortization by type of asset 2006 2007
Intangible assets 1,930 2,719
Property, plant and equipment 4,494 5,385
Assets under operating leases 4,247 4,370
Depreciations excluding
adjustment of goodwill 10,671 12,474
Adjustment of goodwill 1,712 –
Total 12,383 12,474
Capital expenditures
by type of asset 2006 2007
Intangible assets 3,066 2,202
Property, plant and equipment 6,357 7,936
Assets under operating leases 4,611 4,800
Total 14,034 14,938
Capital expenditures for property, plant and equipment approved but not yet implemented at December 31, 2007, amounted to SEK 9.2 billion
(6.8).
Goodwill
Volvo verifi es annually, or more frequently if necessary, the value of its
operations to secure that they do not fall below the carrying value. If
impairment is detected the carrying value, in the fi rst place goodwill,
has to be written down. Volvo’s evaluation model is based on a dis-
counted cash-fl ow model, with a forecast period of four years. Evalu-
ation is made on cash-generating units, identified as Volvo’s
operational areas or Business areas.
Goodwill assets are allocated to these cash-generating units on the
basis of anticipated future utility. The evaluation is based on manage-
ment’s best judgment of the operations’ development. The basis for
this judgment is long-term forecasts of the market’s growth, two to
four percent, in relation to the development of Volvo’s operations. In
the model, Volvo is expected to maintain stable capital effi ciency over
time. The evaluation is made on nominal value and the general rate of
infl ation, in line with the European target, is used. Volvo uses a dis-
counting factor calculated to 12% before tax for 2007.
During 2007, the value of Volvo’s operations has exceeded the carrying
value of goodwill for all operational areas, and accordingly, no
impairment was recognized. The size of the over value differ between
the operations and they are therefore to a varying degree sensible to
changes of the assumptions described above. Volvo follows on
account of this the development of the business areas whose over
value is dependent on the fulfi lment of Volvo’s assessments. The most
important factors for the future operations of Volvo, are described on
the Volvo business areas pages 51–71, as well as in the Risk manag-
ment section, pages 48–50.
Goodwill per Business Area 2006 2007
Volvo Trucks 3,129 4,307
Renault Trucks 1,391 2,331
Trucks Asia – 3,397
Mack Trucks 592 824
Construction Equipment 2,329 7,592
Buses 1,055 1,148
Other business areas 353 370
Total goodwill value 8,849 19,969
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 1,755 (1,633) at year-end. Capital expenditures
during 2007 amounted to 80 (81). Accumulated depreciation was
599 (523) at year-end, whereof 57 (55) during 2007. The estimated
fair value of investment property was SEK 2.0 billion (1.9) 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 295 (281) in rental income from invest-
ment properties and 50 (50) in direct costs.