Volvo 2011 Annual Report Download - page 108

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LEASING
14
NOTE
Volvo as the lessor
Leasing contracts are defined in two categories, operational and financial
leases, depending on the contract’s financial implications. Operational
leasing contracts are recognized as non-current assets in Assets under
operational leases. Income from operational leasing is recognized equally
distributed over the leasing period. Straight-line depreciation is applied to
these assets in accordance with the terms of the undertaking and the
deprecation amount is adjusted to correspond to the estimated realizable
value when the undertaking expires. Assessed impairments are charged
to the income statement. The product’s assessed realizable value at expi-
ration of the undertaking is reviewed continuously on an individual basis.
Financial leasing agreements are recognized as either non-current or
current receivables in the customer finance operations. Payments from
financial leasing contracts are distributed between interest income and
amortization of the receivable in the customer finance operations.
Volvo as the lessee
Volvo evaluates leasing contracts in accordance with IAS 17, Leases. In
those cases in which risks and rewards that are related to ownership are
substantially held by Volvo, so-called financial leases, Volvo recognizes
the asset and related obligation in the balance sheet at the lower of the
leased asset’s fair value or the present value of minimum lease payments.
Future leasing fee commitments are recognized as obligations. The lease
asset is depreciated in accordance with Volvo’s policy for the respective
non-current asset. The lease payments when made are allocated between
amortization and interest expenses. If the leasing contract is considered
to be a so-called operational lease, lease payments are charged to profit
or loss over the lease contract period.
Volvo as the lessor
At December 31, 2011, future rental income from non-cancellable finan-
cial and operational leases (minimum leasing fees) amounted to 50,704
(45,530). Future rental income is distributed as follows:
Finance
leases Operating
leases
2012 12,562 4,111
2013–2016 24,227 8,447
2017 or later 604 753
Total 37,393 13,311
Allowance for uncollectible future rental
income (414) 
Unearned rental income (3,100)
Present value of future rental income related
to non-cancellable leases 33,879
Volvo as a lessee
At December 31, 2011, future rental payments (minimum leasing fees)
related to non-cancellable leases amounted to 3,799 (3,916).
Future rental payments are distributed as follows:
Finance
leases Operating
leases
2012 459 834
2013–2016 360 1,660
2017 or later 63 423
Total 882 2,917
Rental expenses amounted to:
2011 2010
Finance leases:
Contingent rents (12) (8)
Operating leases:
Contingent rents (20) (20)
Rental payments (1,035) (923)
Sublease payments 5 6
Total (1,062) (945)
Carrying amount of assets subject to financial leases:
2011 2010
Costs:  
Buildings 92 124
Land and land improvements 53 69
Machinery and equipment 1,901 1,863
Assets under operating lease1194 338
Total 2,240 2,394
Accumulated depreciation:
Buildings (30) (41)
Land and land improvements - –
Machinery and equipment (1,231) (1,174)
Assets under operating lease1(68) (81)
Total (1,329) (1,296)
Carrying amount in the balance sheet:
Buildings 62 83
Land and land improvements 53 69
Machinery and equipment 670 689
Assets under operating lease1126 257
Total 911 1,098
1 Refer to assets leased by Volvo as financial lease which are later leased to
customers as operating lease.
ACCOUNTING POLICIES
NOTES TO FINANCIAL STATEMENTS
FINANCIAL INFORMATION 2011
104