Volvo 2007 Annual Report Download - page 92
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Please find page 92 of the 2007 Volvo annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.The Volvo Group
88 Financial information 2007
Notes to consolidated fi nancial statements
Exchange rates Average rate Year-end rate
Country Currency 2006 2007 2006 2007
Brazil BRL 3.3927 3.4724 3.2190 3.6800
Canada CAD 6.5096 6.3098 5.9235 6.5960
Denmark DKK 1.2420 1.2423 1.2146 1.2716
Euro EUR 9.2649 9.2564 9.0593 9.4828
Great Britain GBP 13.5822 13.5369 13.4938 12.9113
Japan JPY 0.0635 0.0575 0.0579 0.0573
Norway NOK 1.1516 1.1555 1.0955 1.1885
South Korea KRW 0.0077 0.0073 0.0074 0.0069
United States USD 7.3791 6.7631 6.8738 6.4688
Consolidated fi nancial statements
The consolidated fi nancial statements comprise the parent company,
subsidiaries, joint ventures and associated companies. Subsidiaries
are defi ned as companies in which Volvo holds more than 50% of the
voting rights or in which Volvo otherwise has a controlling interest.
Joint ventures are companies over which Volvo has joint control
together with one or more external parties. Associated companies are
companies in which Volvo has a signifi cant infl uence, which is nor-
mally when Volvo’s holding equals to at least 20% but less than 50%
of the voting rights.
The consolidated fi nancial statement have been prepared in accord-
ance with the principles set forth in IAS 27, Consolidated and Separ-
ate Financial Statements. Accordingly, intra-Group transactions and
gains on transactions with associated companies are eliminated.
All business combinations are accounted for in accordance with the
purchase method. Volvo applies IFRS 3, Business Combinations for
acquisitions after January 1, 2004, in accordance with the IFRS 1
transition rules. Volvo decided not to restate prior acquisitions. Volvo
values acquired identifi able assets, tangible and intangible, and liabil-
ities at fair value. Surplus amounts compared with the purchase con-
sideration are reported as goodwill. Any lesser amount, so-called
negative goodwill, is reported in the income statement. Transactions
with the minority are reported as transactions with external parties to
the group. Divestments to the minority may result in gains or losses in
the income statement. Acquisitions from the minority may result in
goodwill corresponding to the difference between considerations
paid and acquired part of net asset value in the acquired subsidiary.
Companies that have been divested are included in the consoli-
dated fi nancial statements up to and including the date of divestment.
Companies acquired during the year are consolidated as of the date
of acquisition.
Joint ventures are reported by use of the proportionate method of
consolidation.
Holdings in associated companies are reported in accordance with
the equity method. The Group’s share of reported income in such
companies is included in the consolidated income statement in
Income from investments in associated companies, reduced in appro-
priate cases by depreciation of surplus values and the effect of apply-
ing different accounting principles. Income from associated com-
panies are included in operating income due to that the investments
are of operating nature.
For practical reasons, most of the associated companies are
included in the consolidated accounts with a certain time lag, normally
one quarter. Dividends from associated companies are not included in
consolidated income. In the consolidated balance sheet, the book
value of shareholdings in associated companies is affected by Volvo’s
share of the company’s net income, reduced by depreciation of sur-
plus values and by the amount of dividends received.
Translation to Swedish kronor when consolidating
companies using foreign currencies
AB Volvo’s functional currency is the Swedish krona. All reporting in
group companies for group purposes is made in the currency in which
the company has the majority of its revenues and expenses; normally
the currency of the country where the company is located. AB Volvo’s
and the Volvo Group’s reporting currency is Swedish kronor. In pre-
paring the consolidated fi nancial statements, all items in the income
statements of foreign subsidiaries and joint ventures (except for sub-
sidiaries in highly infl ationary economies) are translated to Swedish
kronor at the average exchange rates during the year (average rate).
All balance sheet items are translated at exchange rates at the respec-
tive year-ends (year-end rate). The differences in consolidated share-
holders’ equity, arising as a result of variations between year-end
exchange rates, are charged or credited directly to shareholders’
equity as a separate component.
The accumulated translation difference related to a certain sub-
sidiary, joint venture or associated company is reversed to income as
a part of the gain/loss arising from the divestment or liquidation of
such a company.
IAS 29, Financial Reporting in Hyperinfl ationary Economies, is
applied to fi nancial statements of subsidiaries operating in highly
infl ationary economies. Volvo applies reporting based on historical
value. Translation differences are charged against earnings for the
year. Currently, Volvo has no subsidiaries with a functional currency
that could be considered a hyperinfl ationary currency.
Receivables and liabilities in foreign currency
In the individual Group companies as well as in the consolidated
accounts, receivables and liabilities in foreign currency are valued at
period-end exchange rates. Translation differences on operating
assets and liabilities are recognized in operating income, while trans-
lation differences arising in fi nancial assets and liabilities are charged
to other fi nancial income and expenses.
Currency swap contracts are reported at fair value, unrealized gains
on exchange rates are reported as short term receivables and unreal-
ized losses on exchange rates are reported as short term liabilities.
Exchange rate differences on loans and other fi nancial instruments
in foreign currency, which are used to hedge net assets in foreign
subsidiaries and associated companies, are offset against translation
differences in the shareholders’ equity of the respective companies.