Volvo 2012 Annual Report Download - page 106

ACCOUNTING POLICY
Recognition of business combinations
The Volvo Group applies IFRS 3, Business Combinations, for acquisitions.
All business combinations are recognized for in accordance with the pur-
chase method. Volvo Group measures acquired identifiable assets, tangi-
ble and intangible, and liabilities at fair value. Any surplus amount from the
purchase price, possible non-controlling interests and fair value of previ-
ously held equity interests at the acquisition date compared to the Volvo
Group’s share of acquired net assets is reported as goodwill. Any deficit
amount, known as negative goodwill, is recognized in profit and loss.
In step acquisitions, a business combination occurs only on the date
control is achieved, which is also the time when goodwill is calculated.
Transactions with the minority are recognized as equity as long as control
of the subsidiary is retained. For each business combination, the Volvo
Group decides whether the non-controlling interest should be valued at
fair value or at the non-controlling interest’s proportionate share of the net
assets of the acquiree. All acquisition-related costs are expensed. Compa-
nies acquired during the year are consolidated as of the date of acquisition.
Companies that have been divested are included in the consolidated finan-
cial statements up to and including the date of divestment.
Non-current assets held for sale and discontinued operations
The Volvo Group applies IFRS 5, Non-current Assets Held for Sale and
Discontinued Operations. The standard also includes the treatment of cur-
rent assets. In a global group like the Volvo Group, processes are continu-
ously ongoing regarding the sale of assets or groups of assets at minor
values. When the criteria for being classified as a non-current asset held
for sale are fulfilled and the asset or group of assets are of significant
value, the asset or group of assets and the related liabilities are recognized
on a separate line in the balance sheet. The asset or group of assets are
tested for impairment and, if impaired, measured at fair value after deduc-
tions for selling expenses. The balance sheet items and the income effect
resulting from the revaluation to fair value less selling expenses are nor-
mally recognized in the segment Group headquarter functions and other,
until the sale is completed and the result distributed to each segment.
AB Volvo’s holding of shares in subsidiaries as of December 31, 2012
is disclosed after the notes of the Parent Company in AB Volvo’s hold-
ing of shares. Significant acquisitions, formations and divestments
within the Group are listed below.
Business combinations during the period
In the fourth quarter 2012, the Volvo Group finalized the acquisition of the
French automotive manufacturer Panhard. Panhard was a private owned
company specialized in manufacturing of light transport vehicles adapted
for defense operations. Panhard is included in the Volvo Group’s govern-
mental sales business area. The purchase price amounted to 538 and the
goodwill to 326. The acquisition is not expected to have a significant
impact on the Volvo Group’s earnings and financial position. In addition to
that the Volvo Group has not made any acquisitions during 2012 and 2011,
which solely or jointly have had a significant impact on the Volvo Group’s
financial statements. For acquisitions in 2012 and 2011, the fair-value
adjustments to the acquisition balance sheets have not had a significant
impact on the Volvo Group.
The impact on the Volvo Group’s balance sheet and cash-flow state-
ment in connection with the acquisition of subsidiaries and other business
units are specified in the following table:
Acquisitions 2012 2011
Intangible assets 190 1
Property, plant and equipment 176 132
Assets under operating lease 475 1,503
Inventories 503 38
Current receivables 257 236
Cash and cash equivalents 21 39
Other assets 14 1
Minority interests –387
Provisions (87) (36)
Loans (225) (1,510)
Current liabilities (622) (191)
Acquired net assets 702 600
Goodwill 888 967
Negative goodwill (42) –
Total 1,548 1,567
Cash and cash equivalents paid (1,548) (1,567)
Cash and cash equivalents according to
acquisition analysis 21 39
Effect on Group cash
and cash equivalents (1,527) (1,528)
Effect on Group net
financial position (1,714) (2,248)
NOTE 3
ACQUISITIONS AND DIVESTMENTS OF SHARES IN SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
FINANCIAL INFORMATION 2012
102