Volvo 2011 Annual Report Download - page 100

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INCOME
7
NOTE
The Group’s recognized net sales pertain mainly to revenues from sales of
goods and services. Net sales are, if the occasion arises, reduced by the
value of discounts granted and by returns.
Revenue from the sale of goods is recognized when significant risks
and rewards of ownership have been transferred to external parties, nor-
mally when the goods are delivered to the customer. However, if the sale
of goods is combined with a buy-back agreement or a residual value
guarantee, the transaction is recognized as an operating lease transaction
if significant risks in regard to the goods are retained in Volvo. Revenue is
then recognized over the period of the residual value commitment. If the
residual value risk commitment is not significant and the sale was made to
an independent party or in combination with a commitment from the cus-
tomer to buy a new Volvo product in connection to a buy-back option, the
revenue is recognized at the time of sale and a provision is made to reflect
the estimated residual value risk (refer to Note 21 Other provisions).
Revenue from the sale of workshop services is recognized when the
service is provided. Interest income in conjunction with finance leasing or
instalment contracts is recognized during the underlying contract period.
Revenue for maintenance contracts are recognized in line with the alloca-
tion of associated costs over the contract period.
Interest income is recognized on a continuous basis and dividend
income when the right to receive dividend is obtained.
ACCOUNTING POLICY SOURCES OF ESTIMATION UNCERTAINTY
!
In certain cases, Volvo enters into a buy-back agreement or residual value
guarantee after Volvo has sold the product to an independent party or in
combination with an undertaking from the customer to purchase a new
Volvo product in the event of a buy-back. In such cases, there may be a
question of judgement regarding whether or not significant risks and
rewards of ownership have been transferred to the customer. If it is deter-
mined that such an assessment was incorrect, Volvo’s recognized revenue
and income for the period will decline and instead be distributed over
several reporting periods. Refer to Note 21, Other provisions, for a descrip-
tion of residual value risks.
Hard and soft products
The Volvo Group’s product range is divided into hard and soft products. The
sale of new vehicles, machinery and engines comprise hard products. Soft
products include all products and services apart from the sale of new and
used vehicles, machinery and engines and some extended product offer-
ings, that are sold to customers to provide the customer with an enhanced
experience and greater satisfaction.
Refer to page 42 for more about the Volvo Group’s services.
Refer to Note 6 for information regarding net sales by product and market.
NOTES TO FINANCIAL STATEMENTS
FINANCIAL INFORMATION 2011
96