Volvo 2011 Annual Report Download - page 117

Actual return on plan assets amounted to 81 (2,259).
Actuarial gains and losses 2011 2010
Experience-based adjustments in obligations (3,492) 293
Experience-based adjustments in plan assets (1,324) 861
Effects of changes in actuarial assumptions (209) 235
Actuarial gains and (losses), net (5,025) 1,389
Volvo’s pension foundation in Sweden was formed in 1996 to secure obli-
gations relating to retirement pensions for salaried employees in Sweden
in accordance with the ITP plan (a Swedish individual pension plan). Plan
assets amounting to 2,456 were contributed to the foundation at its formation,
corresponding to the value of the pension obligations at that time. Since
its formation, net contributions of 2,228, whereof 756 during 2011, have
been made to the foundation. The plan assets in Volvo’s Swedish pension
foundation are invested in Swedish and foreign stocks and mutual funds,
and in interest-bearing securities, in accordance with a distribution that is
determined by the foundation’s Board of Directors. At December 31, 2011,
the fair value of the foundation’s plan assets amounted to 7,554 (7,059),
of which 31% (57) was invested in shares or mutual funds. At the same
date, retirement pension obligations attributable to the ITP plan amounted
to 11,624 (8,794).
Swedish companies can secure new pension obligations through
balance-sheet provisions or pension-fund contributions. Furthermore, a
credit insurance policy must be taken out for the value of the obligations.
In addition to benefits relating to retirement pensions, the ITP plan also
includes, for example, a collective family pension, which Volvo finances
through an insurance policy with the Alecta insurance company. Accord-
ing to an interpretation from the Swedish Financial Reporting Board, this
is a multi-employer defined-benefit plan. For fiscal year 2011, Volvo did
not have access to information from Alecta that would have enabled this
plan to be reported as a defined-benefit plan. Accordingly, the plan has
been recognized as a defined-contribution plan. Alecta’s funding ratio is
113% (146).
Volvo’s subsidiaries in the United States mainly secure their pension
obligations through transfer of funds to pension plans. At the end of 2011,
the total value of pension obligations secured by pension plans of this
type amounted to 13,925 (11,378). At the same point in time, the total
value of the plan assets in these plans amounted to 9,842 (9,535), of
which 54% (59) was invested in shares or mutual funds. The regulations
for securing pension obligations stipulate certain minimum levels con-
cerning the ratio between the value of the plan assets and the value of the
obligations. During 2011, Volvo contributed 829 (156) to the American
pension plans.
During 2011, Volvo has made extra contributions to the pension plans
in Great Britain in the amount of 91 (103).
In 2012, Volvo estimates to transfer an amount of about SEK 1 billion
to pension plans.
OTHER PROVISIONS
21
NOTE
Provisions
Provisions are reported on balance when a legal or constructive obliga-
tion exists as a result of a past event and it is probable that an outflow of
resources will be required to settle the obligation and the amount can be
reliably estimated.
Provisions for residual value risks
Residual value risks are attributable to operating lease contracts or sales
transactions combined with buy-back agreements or residual value guar-
antees. Residual value risks are the risks that Volvo in the future would
have to dispose used products at a loss if the price development of these
products is worse than what was expected when the contracts were
entered. Provisions for residual value risks are made on a continuing basis
based upon estimations of the used products’ future net realizable values.
The estimations of future net realizable values are made with consideration
to current prices, expected future price development, expected inventory
turnover period and expected direct and indirect selling expenses. If the
residual value risks pertain to products that are reported as tangible
assets in Volvo’s balance sheet, these risks are reflected by depreciation
or write-down of the carrying value of these assets. If the residual value
risks pertain to products, which are not reported as assets in Volvo’s balance
sheet, these risks are reflected under the line item current provisions. See
also note 7 Income.
Provision for product warranty
Estimated provision for product warranties are reported when the prod-
ucts are sold. The provision includes both contractual warranty and so
called goodwill warranty and is determined based on historical statistics
considering known quality improvements, costs for remedy of defaults
e.t.c. Provision for campaigns in connection with specific quality problems
are reported when the campaign is decided.
Provision for Restructuring costs
A provision for decided restructuring measures is reported when a detailed
plan for the implementation of the measures is complete and when this
plan is communicated to those who are affected. Restructuring costs are
reported as a separate line item in the income statement if they relate to
a considerable change of the Group structure. Other restructuring costs
are included in Other operating income and expenses.
ACCOUNTING POLICY
Shares and participation, Volvo 403 (2%)
Shares and participations, other,
11,494 (50%)
Bonds and interest-bearing
securities, 9,100 (40%)
Property, 440 (2%)
Other, 1,517 (6%)
Plan assets by category 2010
Shares and participation, Volvo 246 (1%)
Shares and participations, other, 9,565 (40%)
Bonds and interest-bearing
securities, 12,460 (52%)
Property, 644 (3%)
Other, 958 (4%)
Plan assets by category 2011
113