Volvo 2012 Annual Report Download - page 118

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The Volvo 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, normally
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 Group. Revenue is then
recognized over the period of the residual value commitment. If the residual
value risk commitment is not significant or the sale was made to an inde-
pendent party before Volvo Group is committed to the residual value risk 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). If sale
is in combination with a commitment from the customer to buy a new Volvo
product in connection to a buy-back option, revenue is recognized at the
time of the sale.
Revenue from the sale of workshop services is recognized when the
service is provided. Interest income in conjunction with finance leasing or
instalment contracts are recognized during the underlying contract
period. Revenue for maintenance contracts are recognized in line with the
allocation 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
!
Buy-back agreements and residual value guarantees
In certain cases, Volvo Group enters into a buy-back agreement or residual
value guarantee after Volvo Group has sold the product to an independent
party or in combination with an undertaking from the customer to purchase
a new product the event of a buy-back. In such cases, there may be a ques-
tion of judgement regarding whether or not significant risks and rewards of
ownership have been transferred to the customer. If it is determined that
such an assessment was incorrect, the Volvo Group’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 description 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. As
from January 1, 2012 hard products also include sale of used vehicles and
machines, trailers, superstructures and special vehicles. As from January 1,
2012 Soft products include services and aftermarket products.
Refer to page 28 for more information about the Volvo Group’s services.
Refer to Note 6 for information regarding net sales by product and market.
NOTE 7
INCOME
NOTES TO FINANCIAL STATEMENTS
FINANCIAL INFORMATION 2012
114