Volvo 2010 Annual Report Download - page 91

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Depreciation and
amortization by type of asset 2009 2010
Intangible assets 3,589 3,305
Property, plant and equipment 6,562 6,077
Assets under operating leases 5,076 4,410
Total 15,227 13,792
Capital expenditures by type of asset 2009 2010
Intangible assets 2,935 3,324
Property, plant and equipment 7,392 6,988
Assets under operating leases 4,246 4,893
Total 14,573 15,205
Goodwill
Volvo verifies annually, or more frequently if necessary, the value of its
operations to ensure that they do not fall below the carrying value. If
impairment is detected, the carrying value, in the first place goodwill,
has to be written down. Volvo’s evaluation model is based on a dis-
counted cash-flow model, with a forecast period of four to seven
years. Evaluation is made on cash-generating units, identified as Vol-
vo’s business areas.
Goodwill assets are allocated to these cash-generating units on
the basis of anticipated future utility. The evaluation is based on man-
agement’s best estimation of the operations’ development. The basis
for this estimation 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 efficiency over
time. The evaluation is made on nominal values and a general rate of
inflation in line with the European target is used. Volvo uses a dis-
counting factor calculated to 12% (12) before tax for 2010.
During 2010, the value of Volvo’s operations has exceeded the
carry ing value of goodwill for all business areas, and accordingly, no
impairment has been recognized. Volvo has also evaluated whether
there still is an overvalue with reasonable changed assumptions,
negatively adjusted with one percentage point, where of no adjust-
ment, individually, would have such a big effect that there would be an
impairment.
Since the overvalue differs between the business areas they are to
a varying degree sensitive to changes in the assumptions described
above. Volvo therefore continuously follows the development of the
business areas whose overvalue is dependent on the fulfilment of
Volvo’s assessments. Instability in the business recovery and volatility
in interest and currency rates may lead to indications of impairment.
The most important factors for the future operations of Volvo are
described in the Volvo business area section, as well as in the Risk
management section.
Goodwill per Business Area 2009 2010
Volvo Trucks 3,905 3,913
Renault Trucks 2,580 2,249
TrucksAsia 5,752 6,041
North AmericanTrucks 1,387 1,334
Construction Equipment 8,607 7,806
Buses 1,178 1,174
Other business areas 418 419
Total goodwill value 23,827 22,936
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 1,692 (1,681) at year-end. Capital expend-
itures during 2010 amounted to 11 (87). Accumulated depreciation
was 744 (690) at year-end, of which 55 (54) during 2010. The esti-
mated fair value of investment property was SEK 1.8 billion (2.5) at
year-end, based on the yield. The required return is based on current
property market conditions for comparable properties in comparable
locations. 89% of the investment properties were leased out during
the year (93). Net income for the year was affected by 223 (268) in
rental income from investment properties and 63 (45) in direct costs.
87